How To Increase The Loan Amount On A Reverse Mortgage | Finance


How To Increase The Loan Amount On A Reverse Mortgage | Finances – Zacks

By: Marie Huntington

Seniors can receive the cash value of their home equity through reverse mortgages.

Hemera Technologies / AbleStock.com / Getty Images

A reverse mortgage allows you to borrow against the equity in your home. The main limit is the maximum amount you can receive from the reverse mortgage. This amount is determined at closing and you have the right to choose the payment option depending on how the funds will be paid to you. To get an increase in the reverse mortgage amount, you have the option of refinancing your existing mortgage.

Payment options

Three main payment options allow you to tailor your disbursements according to your financial goals. You can choose a monthly occupancy plan, in which you receive equal monthly payments for as long as you live in the house. The monthly plan allows you to receive equal monthly payments for a fixed period. With a line of credit, you can request payments until you reach your primary limit. Other options allow you to choose a modified payment plan, such as a plan that combines term payments and a line of credit.

Refinancing

When you have received all payments that match the principal limit amount plus interest and accrued charges, you can no longer receive payments under the reverse mortgage. If you want to increase the loan amount and borrow against the additional equity in your home, you have the option of refinancing your reverse mortgage. Many homeowners choose to refinance reverse mortgages for several reasons, such as an increase in the Federal Housing Administration loan limit or a decrease in interest rates. The lender will take into account the outstanding balance of the current loan, the main limit and the maximum amount of the claim. The lender will also take into account the current value of the home in addition to the age of the borrower.

Main limit

The primary limit is determined by a calculation using certain factors, such as the age of the borrower, the appraised value of the property, the mortgage interest rate, and mortgage insurance premiums. Federally insured home equity conversion mortgage lenders should use calculations approved by the Department of Housing and Urban Development to determine the original primary limit. Some private insurance lenders also align their formulas with the HUD calculations.

Changing payment options

After closing your reverse mortgage, you have the flexibility to change payment plans at any time. For example, if you have selected an occupancy plan, with which you receive periodic payments as long as you occupy the house, you can switch to a term plan, line of credit, or modified payment plan, or you can receive a lump sum payment. You can also suspend periodic payments for a period of time, reduce your payments, or increase your payments. Based on the original loan amount, changes can be made at any time as long as the changes do not exceed the primary limit.


Comments are closed.