Age doesn’t prevent the elderly from applying for loans. People who are aged 62 or more can actually apply for a home loan through a reverse mortgage. Known as lifetime mortgage in other parts of the world, a reverse mortgage is a kind of loan available only to seniors. This loan is used to release the property’s home equity either as one lump sum or payments through installment. The repayment obligation is deferred until the home is sold, the owner leaves (for care homes) or if the owner dies. This type of popular mortgage is equivalent to an annuity in which the principal and interest are paid with the homeowner’s equity, so it’s not something that should be considered until you have all the reverse mortgage information needed.
Conventional mortgages would require the homeowner to make a monthly amortized payment to the lender. The property equity increases after each payment. Depending on the duration of the term, the mortgage is supposed to be paid in full after the term. The property is then released from the lender after which the homeowner will then have full ownership of the property. In a reverse mortgage, on the other hand, no payment shall be made. The interest will be added to the lien of the property. Lien, in legal parlance, is actually a sort of security interest which is granted over an item or property. This is important so that a lender or an owner of a property will have security in receiving the payment of a debt or other obligation.
There are no strict requirements for people to be eligible to apply for this type of loan. There are no minimum credit or income requirements needed. However, one must be at least 62 years old as reverse mortgage are catered for seniors. They can use the money for whatever purpose they deem necessary. But there are some minor issues that borrowers must have to deal with. First, they must pay off existing mortgages (if there were any). Of course, when one is on the verge of bankruptcy, the application process will slow down. Another issue would be the type of property. There are some properties that do not qualify while some have specific requirements before the loan can be granted.
The amount of money that will be given to the homeowner is determined by the appraised value of the property, the interest rate, the age of the borrower (the older he or she is the more money he or she will get), the release of payment (whether one slump sum or monthly payments), and the location of the property. These factors comprise the Total annual Lending Cost (TALC).
The loan ends when the house is sold or when the owner leaves the property for one whole year (or 12 straight months). The reverse mortgage can then be paid through the proceeds of the sale. Qualified relatives may also opt to refinance the property through regular mortgage.
Even credit crunch couldn’t stop old people from applying for reverse mortgage. In 2006, there was a 56 percent rise for this type of loan. The trend continued in 2007. This led the Federal Government to remove restrictions on the number of active reverse mortgage loans they would underwrite at any time.
I’d never heard of these types of mortgages. Interesting. Do you have any guidance as to how to a person can actually go about applying for one?
In order to obtain a reverse mortgage, interested applicants should contact a local lending institution and inquire about the different options and rates available.
Personal and financial history, including a credit report, will need to be made available to the lending institution. A property appraisal may also be required.
A friend of mine is retiring and we looked at these but decided against them as they wouldn’t lend a large enough amount.
Instead, we went with a secured line of credit with interest-only payments.
This way, he only uses the money when he really needs it … this kind of forces him to be a bit more frugal, I think.
I am 52 years old and my husband is 85 years old. we been married almost 30 years. We have an apartment in San Juan Puerto Rico, that is our one property were we live, the thing is that the apartment is in my name for some reasons that my husband back when he was working, he has his own company, when we buy the apartment he decided to do it that way.
The question is, Can we qualify for a reverse mortgage, because he have the age to qualify, and we are legally married?
Thanks always, Monique
Monique I would exercise caution and make these decisions slowly. Whether your husband is still active, do you want to travel?, do you have assets to buy back the apt. after your husband is gone. I will make an assumption w/o anymore facts that your apt. is paid for. A reverse mtg. has its purpose but it doesn’t fit everyones needs. The fees on a reverse mtg. can be quite high. Using a reverse mtg. to avoid raiding a cd with penalty is generally not a good idea. With your age difference why encumber the apt. when you are likely to need it for years. If health issues and health costs are a concern then I would be more inclined to protect the apt. with such things such as homestead filing or examining other ideas. He probably has medicare and may have service experience which may give him health benefits and even income if he was in combat.
Temporary cash flow issues are not a good reason to encumber your home nor is debt. I would advise anyone to avoid encumbering their home to pay off credit cards. I have seen horror story after horror story about people who use their home to pay off unsecured debt and then lose or can’t afford the home even within my family. It is far better to get a part-time job than encumber your home. Alot of this depends on your husbands health. If you need a nurse or costly procedure look at all the alternatives first. Beware too of doing the extreme things to extend life when nearing the end because that is when medical debt can crush you and often for no good reason other than our inability to let go. If you are healthy you could even learn new skills so you are more valuable on the job mkt. Make these decisions slowly and with all the cards on the table so you are fully informed. God Bless.