So closing costs can be as high as $12,000 on a $150,000 loan. Origination fees are capped at $6,000 on a HECM loan. Reverse money mortgages are expensive up front: The hefty government insurance fee, 2 percent of the value of your home (as opposed to the amount of the loan), is the bulk of the cost.Do you want to spend all of the home’s equity, or leave some equity for your kids? As you stay in your home, your debt can grow to equal the value of the house and your heirs won’t receive a thing.How will you use the money? It’s pretty much always a bad idea to use a reverse mortgage to pay for a vacation or a risky investment.What payout is best for you? Unless you need the money right away, it’s best to opt for installment payments since the money you take starts accumulating interest immediately.How long do you expect to stay in your house? The right answer is “at least seven years.” Reverse money mortgages become less expensive over time the longer you live, the cheaper they are.If you need a large amount, you might consider moving to a less expensive property instead. If you need only a small amount for a short time, try taking a home equity line of credit. Is a reverse mortgage your best option? If you have the income and credit rating to qualify for a traditional mortgage, it may be a better option.Reverse money mortgages typically have a “nonrecourse” clause, which means you and your estate will never owe more than what your home is worth.Lenders cannot look to other assets of the borrower or the heirs to repay the loan. They’re sensitive to the market and don’t want to lose money in a rushed sale. Most lenders in the industry automatically allow 90 to 180 days if the heirs opt to sell the home.Any remaining equity in your home belongs to you or your heirs. The loan is repaid in full, including all interest and other charges, when the last living borrower dies, sells the home or moves away.Reverse mortgages are also available on 2- to 4-unit properties, condos, co-ops, planned unit developments and prefab homes. Owe the lender nothing: It must be your primary residence.Any mortgage balance is paid off at closing with proceeds from the new reverse loan. Must have wiggle room: You must own your home outright, or have a low mortgage balance.That means each owner of the home must be 62 or older. 62 years or older: Borrowers must be 62 years or older.Lender can’t cancel: Unlike a home equity line of credit, the proceeds from a reverse mortgage can’t be frozen or canceled.In fact, making certain repairs and maintaining your home can be a requirement of the loan. You still pay property taxes: You’re still responsible for property taxes, insurance and home repairs.The government is losing money on this program and, as reverse mortgages become more popular, federal fees will go up as the loan amounts are lowered. Lender fees are now capped at $6,000 regardless of the size of the loan, so borrowers can get more money for lower fees. New loan limit raised to $625K: HUD recently increased limits on federally insured reverse money mortgages to $625K for this year.You make no monthly payment: Unlike a traditional mortgage, you make no monthly payments while you live in your home, and with the new FHA’s Home Equity Conversion Mortgage (HECM), you can move to a nursing home or other medical facility for up to 12 consecutive months before the loan must be repaid.Take the money as you like it: There are different ways to take the money you can take one lump sum, monthly payments over a fixed period of time, or as a line of credit to use when you want.The oldest borrowers with the most expensive homes get the biggest loans. The older you are, the bigger the loan: The amount of cash you can get depends on your age, usually your home’s value and the reverse mortgage plan you choose.
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