Reverse Mortgage & Principal Limit
A reverse mortgage allows older homeowners to draw a monthly payment from a lender against the equity in their homes. Unlike a traditional mortgage or home-equity loan, there is no repayment period until the borrower no longer lives in the home. Usually this occurs with the death of the homeowner. Family members can pay back the loan or allow the lender to foreclose and sell the home to recoup losses.
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Qualifications
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To qualify for a reverse mortgage, you must be at least 62 years old and own your home outright--or owe a small balance--and you must live in the home as your primary residence.
Eligibility
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Single-family residences, duplexes and fourplexes qualify for a reverse mortgage.
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Considerations
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Income and debt-to-income ratios do not qualify or disqualify a borrower since the lender is paying out the money each month. Thus, obtaining a reverse mortgage makes more sense than a mortgage or home equity line of credit for individuals on a fixed income.
Benefits
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Loan limits are capped by the value of your home. This means that you will never owe more than your home is worth, while under a reverse mortgage. This is helpful when it comes time to sell the home and repay the note.
Other Criteria
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Limits are also determined by your age, the current interest rate and the Federal Housing Administration mortgage limits in your area. Regardless of how much your home is worth, you may not be eligible to borrow the full amount if the FHA limits are less. Find the FHA loan limits in your area by visiting hud.gov.
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