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Reverse mortgage loans are a method that seniors can use to access the equity in their homes without selling. These loans are similar to home equity loans, though both the principal and interest are deferred so long as the homeowner occupies the premises. After reverse mortgage loans are issued, interest on the principal and any other fees are added to the total value that is owed, and must be paid off if the homeowner moves or passes away. There are minimum age limits that must be met to apply for reverse mortgage loans and also maximum amounts that can be borrowed, regardless of the value of a home. Some costs associated with reverse mortgage loans include origination fees, appraisals, and mortgage insurance.
In the US, a person must typically be older than 62 years old to take out a reverse mortgage. He must also have equity established, either by owning the home free and clear or owing less than it is worth. The percentage of equity that he can draw down is typically a function of his age, and older seniors are allowed to access more equity. As a condition of reverse mortgage loans, the homeowner is typically required to satisfy existing mortgages with the proceeds before spending them in any other way. In many cases, the homeowner will also need to complete any bankruptcy proceedings before being granted a reverse mortgage.
It is typically possible to get reverse mortgage loans for both stick-built and mobile homes, though the latter will often have other requirements. In order to qualify for reverse mortgage loans, mobile homes typically have to be built no earlier than 1976, and have a permanent foundation. Other requirements are often present regardless of the type of home. Homeowners will typically be required to seek counseling regarding the decision to take out a reverse mortgage so that they understand exactly how these loans function and the potential consequences.
After a homeowner has taken a reverse mortgage, he is typically allowed to occupy the home for the remainder of his life. He retains legal ownership of the property, and the reverse mortgage loans typically do not have to be satisfied until the owner leaves the home or passes away. A homeowner is usually allowed to leave the premises for as many as 364 days, such as for extended nursing care or rehabilitation, before the lender can demand that the reverse mortgage be paid. Similarly, any heirs to the estate typically have one year to decide what to do with the home if the homeowner dies.
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