Who can qualify?
What is a reverse mortgage?
A reverse mortgage is a type of loan program that allows you to take the equity on your home and use it for cash. The equity in your Las Vegas home gets accumulated over time. The money you receive is usually not taxable and it should not affect any benefits you receive. With this type of mortgage, you do not have to repay as you would with a Home Equity Line of Credit (HELOC) unless, you no longer occupy the home as your primary residence. If you sell or one of the borrowers passes away then, you or your spouse will be responsible for the payments back for the amount taken out. With your regular mortgage, you pay a monthly payment to eventually completely own the home. With this mortgage, you are getting a loan where they pay you. The equity on your home is converted into payments to you.
There are a few different types of reverse mortgages offered. There is your most common which is the Home Equity Conversion Mortgages (HECMs). HECM is FHA’s mortgage program that is great for older homeowners trying to get some financial security. Other types of these mortgages are single-purpose and proprietary. Single-purpose is the cheapest option. This mortgage is offered by some state and local government agencies. Keep in mind, not all lenders offer this type of mortgage. Your lender will tell you what you can use the money for. For example, they may say you can use it for home repairs, improvements or property taxes. Proprietary mortgages are for higher value homes. If you do not owe much on your existing mortgage then, this may be the mortgage for you. You will be able to get more money back.
If you have any questions about what this type of mortgage is, contact your Las Vegas Mortgage Broker today!
Requirements for a reverse mortgage and types offered
There are a few requirements that will need to be satisfied in order for you to obtain this mortgage. You will need to be 62 and older. Your existing mortgage needs to be almost paid off or completely paid off. If your existing mortgage is not paid off, it will be paid off with your proceeds from your loan. You will also be responsible for paying ongoing finances for your home as well such as, homeowner’s insurance, property taxes and HOA if applicable. You will need to be living in the home to receive the payments or lump-sum of cash. Your home must be a single family home or a 2-4 unit home with at least one of the units occupied by you. You will be able to choose the type of payment you would like to receive. A requirement for an FHA HECM is to obtain counseling for consumer information. You are required to get counseling before obtaining this loan. The counselor will go through loan costs and financials. They will also give you other options in order for you to make your decision.
As previously stated, there are three different types of these mortgages offered. There is a single-purpose mortgage, which you can obtain from a state and local government. Keep in mind, they are not available everywhere. This type of mortgage is for singular purpose. So, your lender will choose what it can be for. For example, your lender may say the money can be used for home improvement. This would be your cheapest option. Another option is a proprietary mortgage, which is for higher value homes. If you expect to have a high appraised home then, you may be able to get more cash back! The most common is the HECM, which is backed by the U.S. Department of Housing and Urban Development (HUD). This type of mortgage can be used for anything, not just a single purpose. The HECM and proprietary mortgages are the more expensive ones. The costs of the loan is typically higher than the single-purpose and traditional home loans.
If you have any questions about the requirements, please contact your Las Vegas Mortgage Broker today.
Reverse Mortgage vs. Home Equity Loan
A reverse mortgage and a home equity loan both take advantage of the equity in your Las Vegas home. A home equity loan is a second mortgage added to your existing first mortgage. So, you will be making a payment to your first mortgage and the second mortgage. There will be two separate payments. With a Home Equity Loan, you can borrow up to 89.99% of the value of your home. For example, you have a first mortgage of $100,000 and your value of your home is $300,000 you would be able to take out $168,000 give or take. You can use those funds to pay off debt or do some improvements to your home! Your payment for a Home Equity Loan will just be principal and interest.
Now that you know what a Home Equity Loan is, the biggest difference between a reverse and a Home Equity Loan is the payment. A reverse will not require a payment and a HELOC will. A reverse will pay off your existing mortgage, if low enough to do so. A HELOC will keep your first existing mortgage in place. A reverse will require you to pay insurance, flood insurance, property taxes and HOA, if applicable. A HELOC will not be paying for those things, because your existing mortgage should be paying for those already.
Find more information on Home Equity Line of Credit.
If you have any questions on the difference between these loan, give your Las Vegas Mortgage Broker a call!
Would you benefit with a reverse mortgage?
A reverse mortgage is a commitment. It is a commitment because there are many factors to consider if you want to obtain one. There are a few questions to ask yourself if you are considering one, they are as follows:
You are required to stay in your home in order to not pay back the loan. If you end up selling or moving out of the home, you will be required to pay it back. You may use the selling proceeds to do so. You are also required to pay insurances, taxes and HOA payments. Your previous mortgage paid these for you. Your escrow account would no longer be open, because your loan has been paid off. You will no longer have an existing mortgage but, there are other expenses. These are all important factors to consider.
There are some good things to come out of getting this mortgage as well. For one, your existing mortgage will be paid off. You will no longer have to make a payment! Your payment can be used to pay off medical bills, debt, etc.! Having these extra funds per month will help be more financially stable. You also can use these funds to do some home improvements. There are a few different ways that you can receive payments, they are as follows:
There are a few factors that determine how much you will get approved for. One of the factors is your age. If you and your spouse are on the loan, we will take the age of the youngest spouse. Another factor will be the value of your home and the interest rate. Keep in mind, for a HECM mortgage your appraised value must be less than $636,150.
If you have any questions about any of the mortgages mentioned here, please contact your Las Vegas Mortgage Broker today and we would be happy to assist!