The loan amount from a reverse mortgage depends on your age (if there is more than one borrower, then it depends on the age of the youngest borrower), current interest rates, and the value and location of the home. The older you are, the more money you can receive.
There are limits to how much you can draw on. The limit is about 80% of the equity. Should the value of the home rise over time, you will be able to draw out more. The government does limit the maximum you can borrow, based on where you live.
When you hold a reverse mortgage, you continue to keep title to the home. The lender does not own it during this period.
You have the right to cancel without penalty within three business days. You must notify the lender in writing. The lender has 20 days to return any money you've paid for financing.
Your loan balance grows over time
In all, your loan balance is comprised of the amount you borrow, interest, various fees for servicing, and mortgage insurance premiums. Because you are not making payments, the outstanding balance grows larger over time. On the other hand, a regular mortgage grows smaller over time. When you die, sell the home, or vacate the home, the balance will become due. In most cases, you must sell the home in order to pay back the loan. If your heirs or someone else steps in and pays back the loan, then the home need not be sold and can pass to your heirs.
If any money remains after the home is sold, that money goes to you or your heirs. If any money is still owed to the lender, you, or your estate, are not required to pay it off. That is the risk the lender takes. The lender is likely to be protected under Federal Housing Administration insurance (which you as a borrower are paying into via a mortgage insurance premium) and can therefore recoup its loss.
There are several fees involved in a reverse mortgage, though they are not automatically charged by all lenders. They include:
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