A Primer on Reverse Mortgages

A Primer on Reverse Mortgages

Many banks and private mortgage lenders like Quicken Loans have increasingly seen reverse mortgages grow in popularity amongst American mortgage consumers. With a reverse mortgage, the lender makes payments to the borrower instead of the other way around. The owner of the property does not have to pay the loan back until either he or she either sells the house, or passes away, at which point the principal and accumulated interest would be subtracted away from the proceeds of the sale. Any funds left over after the reverse mortgage is paid off belongs to the borrower if alive or their beneficiaries if deceased.

Lenders look at three primary factors in assessing how much money a borrower can borrow under their agreement. These include: the borrowers age, the amount of home equity, and prevailing interest rates.

Homeowners must be at least 62 of age years to qualify. If a reverse mortgage is applied for by joint borrowers, the amount the borrowers are eligible for is based upon the age of the youngest borrower. In regards to equity, borrowers can typically borrow up to 50% of their home’s equity depending on their reverse mortgage lender and specific program. In terms of interest rates, generally the lower current interest rates are at the time the loan is processed, the lesser the cost and the more money a borrower will have access to.