You may hear about reverse mortgages in television and radio commercials, and there’s the possibility a reverse mortgage could be a boon to you. To help you understand why they exist and how you could benefit from one, let’s go over what you should know about reverse mortgages in Rochester, NY.
What Is a Reverse Mortgage?
If you’re coming from the vantage point of having heard advertising urging you to contact a company to get a reverse mortgage where the company will pay you every month to live in your own home, chances are you think it seems a bit shady or too good to be true.
A reverse mortgage is a loan that you are taking out based on your existing home equity. To clarify, home equity is the amount of money you have put into owning your home. If you are currently paying a mortgage, the difference between your home loan’s original balance and the remaining balance on that loan is your home equity – the amount of money you have personally paid into owning your home.
Much like a traditional mortgage, the interest rate of the reverse mortgage may be fixed or adjustable rate and requires you to pay back the loan and interest after a certain period of time.
What Kinds of Reverse Mortgages Are Available?
These types of loans do come in a few different flavors: Single-purpose, proprietary, and home equity conversion mortgage – or HECM.
First, a single-purpose reverse mortgage is often issued through a local government agency or non-profit organization to provide funds that can only be used to pay for a singular reason. A few examples of these purposes include home repairs, property taxes, and renovations.
It’s important to remember that the purpose for which the loan may be used is dictated by the lender, so you want to be transparent and upfront regarding your intentions. Single-purpose reverse mortgages are typically approved for homeowners with low income to provide assistance.
Next, a proprietary reverse mortgage is a private loan issued through a company rather than a public agency. These are aimed at higher income earners with increased property values, and the terms are laid out by your chosen private lender prior to issuing the loan.
This functions similar to your typical mortgage with you being paid the monthly payment up to an amount settled on by your lender before anyone signs on the dotted line. Proprietary reverse mortgages can be used for any purpose unless stated otherwise in the terms of the loan.
Finally, a HECM is a regulated reverse mortgage insured by the federal government through the United States Department of Housing and Urban Development, or HUD. HECMs require thorough vetting and meeting with an approved loan counselor before anything is put together.
HECMs can be used for any purpose and come with a number of different disbursement options.
How Do I Pursue a Reverse Mortgage?
If you’re interested in getting more information about reverse mortgages or looking for assistance with getting your application started, contact your local housing authority for more details.
Based on your income, property value, and built equity, they will be able to provide solid guidance on where to take your next steps. Another option is to go directly to a government-approved housing counseling agency, who will then be able to get your application started or send you in the right direction based on your personal circumstances.
Don’t be afraid to ask detailed questions while taking things one step at a time.
We strongly suggest you do not contact any companies or organizations actively advertised in your area unless directed that way by either the local housing authority or the government-approved housing counselor.
Help Finding Reverse Mortgages in Rochester, NY
If you’re looking into your options when it comes to reverse mortgages in Rochester, NY, contact us today at (585) 502-9290!
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