If you're a homeowner age 62 and older, you may be considering a reverse mortgage to tap into your home equity. After all, a reverse mortgage can 澳洲幸运5官方开奖结果体彩网:provide much-needed funds for basic living expenses, medical bills, and home repairs—while you remain in the home. 

There are 澳洲幸运5官方开奖结果体彩网:several types of reverse mortgages, including the 澳洲幸运5官方开奖结果体彩网:homeℱ equity conversion mortgage (HECM) and 澳洲幸运5官方开奖结果体彩网:single-purpose reverse mortgage. The HECM is the most widely used reverse mortgage and offers the most flexibility. On the other hand, a single-purpose reverse mortgage 🐬can be a cheaper way to fund a specific expe🌳nse, such as property taxes or home repairs. 

What Is a Reverse Mortgage?

Most people who buy a house need a mortgage to finance the purchase. After years (or decades) of mortgage payments, much of your net worth can be tied up in your home's value. This can be troublesome for older adults trying to cover basic living expenses, healthcare costs, home improvements, etc. 

A 澳洲幸运5官方开奖结果体彩网:reverse mortgage lets homeowners age 62 or older convert some of that home equity into cash to pay bills and meet other financial obligations. Instead of making payments to a 澳洲幸运5官方开奖结果体彩网:mortgage lender, the lender pays you money based on 澳洲幸运5官ꦉ方开奖结果体彩网:the 🏅equity you've built in your home.

How Does a Reverse Mortgage Work?

Like a regular mortgage, your home is 澳洲幸运5官方开奖结果体彩网:collateral for a reverse mortgage. You can generally receive the funds in a lumpಞ sum, equal monthly payments, or a line of credit. Your debt increases over the loan's life while your home equity decreases. 

When you sell the home, move, or die, the home's sale proceeds go to the lender to repay the loan. If the house sells for more than you owe, the difference goes to you—or your estate if you are deceased. 

Reverse Mortgage Costs

At first glance, reverse mortgage rates may seem lower than other mortgages. However, numerous fees can make reverse mortgages prohibitively expensive, including: 

• Mortgage insurance premiums (MIP): Two percent initial MIP at closing and an annual MIP that's 0.5% of the outstanding mortgage balance
• Third-party charges: 澳洲幸运5官方开奖结果体彩网:Appraisal, 澳洲幸运5官方开奖结果体彩网:title search and insurance, surveys, 澳洲幸运5官方开奖结果体彩网:inspections, recording fees, mortgage taxes, and credit checks
• Origination fees: The greater of $2,500 or 2% on the first $200,000 of your home's value plus 1% of anything over $200,000, capped at $6,000
• Loan 澳洲幸运5官方开奖结果体彩网:servicing fees: Up to $30 per month if the loan has an annually adjusting interest rate or fixed interest rate and up to $35 per month if the interest rate adjusts monthly
• Interest: Many loans have 澳洲幸运5官方开奖结果体彩网:variable interest rates, which can increase over time and raise the cost of borrowing

And, since reverse mortgages are open-ended—meaning there's no fixed payoff date—the interest and fees can accrue for a long time before the borrower sells, moves, or dies.   

What Is a Home Equity Conversion Mortgage (HECM)𒊎?

A home equity conversion mortgage (HECM) is a reverse mortgage program insured by the 澳洲幸运5官方开奖结果体彩网:Federal Housing 🐬Administration (FHA) and issued through FHA-approved lenders. HECMs represent nearly all of the reverse mortgages that lenders offer on homes valued below $1,149,825 (above that, you'll need a jumbo or proprietary reverseꦬ mortgagꦯe).

There are strict borrower and property requirements for HECMs. Here's a rundown of what to expect: 

HECM borrower requirements

When you apply for an HECM, the lender will verify your income, assets, monthly living expenses, 澳洲幸运5官方开奖结果体彩网:credit history, and timely payment of real estate taxes and hazard/澳洲幸运5官方开奖结果体彩网:flood insurance premiums. Additionally, you must: 

• Be 62 or older
• Own the property outright or have considerable equity in it
• Live in the home as your 澳洲幸运5官方开奖结果体彩网:principal residence
• Not be delinquent on any federal debt (e.g., taxes, student loans)
• Have the financial resources to pay property taxes, insurance, 澳洲幸运5官方开奖结果体彩网:homeowners association (HOA) fees, and the like
• Participate in a consumer information session given by a HUD-approved HECM counselor

HECM property requirements

Eligible properties—which must meet all 澳洲幸运5官方开奖结果体彩网:FHA p🅘roperty standards and flood requiremeᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚnts—can include:

• Single-family homes and two to four-unit homes (e.g., duplexes) with a borrower-occupied unit
• HUD-approved 澳洲幸运5官方开奖结果体彩网:condominium projects
• Individual condo units meeting FHA single-unit approved requirements
• 澳洲幸运5官方开奖结果体彩网:Manufactured homes that meet FHA requirements 

What Is a Single-Purpose Reverse Mortgage?

Single-pu𒆙rpose reverse mortgages are far less common than HECMs. These mortgages are offered by state, local, and nonprofit agencies and tend to be the least expensive reverse mortgage option.  

While you can use an HECM to pay for everyday living expenses, single-purpose mortgage funds must be used to pay for specific, lender-approved items, ꦿsuch as property taxes or home repaওirs.  

Single-purpose reverse mortgages are generally easier to qualify for and more affordable than HECMs. Most homeowners with low or moderate incomes can qualify for these loans.

The Bottom Line

The high costs of reverse mortgages make them a poor choice for many homeowners. If you want to avoid a reverse mortgage—but still need access to cash—you might 澳洲幸运5官方开奖结果体彩网:consider refinancing your mortgage, taking out a 澳洲幸运5官方开奖结果体彩网:home equity loan, or 澳洲幸运5官方开奖结果体彩网:downsizing your home and pocketing the extra cash.  

If you decide a reverse mortgage is the right choice for you, be sure to shop around and compare the costs of the loans available to you. While lenders generally charge the same mortgage insurance premiums, the other loan costs—including origination fees, closing costs, servicing fees, and interest rates—tend to vary by lender.