Reverse Mortgage Loans Alabama

A reverse mortgage is a type of loan that allows homeowners 62 and older to turn their home equity into cash. This loan is secured by the homeowner’s home and does not require monthly mortgage payments. The loan must be repaid when the homeowner sells or vacates the property, or earlier under specific conditions, such as failure to pay property taxes, homeowners insurance, or neglect of home maintenance.

Types of Reverse Mortgage

There are typically three reverse mortgage types: reverse mortgages with a single purpose, proprietary reverse mortgages, and home equity conversion mortgages (HECM).

• The single-purpose reverse mortgage is a government- or non-profit-backed option for accessing home equity for a particular purpose.

A single-purpose reverse mortgage is an agreement between a lender and a borrower in which the lender gives the borrower money in exchange for a portion of the borrower’s home equity. The payments received by the borrower must be used for a specific purpose approved by the lender and specified in the loan.

Advantages of a single-purpose reverse mortgage:

1. Eliminating traditional mortgage payments and accessing home equity while still owning and living in the home.
2. Modifying an asset that would otherwise be hard to sell into cash that can be used to pay bills in retirement.

Disadvantages of single-purpose reverse mortgages:

1. As time goes on, the amount owed to the lender on the loan balance goes up. The home equity decreases as interest and fees are added to the loan balance each month.
2. With a single-purpose reverse mortgage, the money can only be used for the purpose approved by the lender and written into the loan. This limits how the funds can be used.

• A proprietary reverse mortgage is a private mortgage that is not guaranteed by the federal government and is typically issued to borrowers who require more than the HECM maximum.

A proprietary reverse mortgage is a mortgage loan provided and guaranteed by a private entity instead of a government-insured reverse mortgage loan. It enables the homeowner to access the equity in their house and utilize the funds for any purpose. Government-insured reverse mortgages are subject to the same limits and regulations as proprietary reverse mortgages. However, they are not regulated; therefore, the loan terms might vary significantly between lenders.

Advantages of a Proprietary Reverse Mortgage

1. Homeowners can use the money from their home equity for anything they want.
2. Possible to get more money than with reverse mortgages insured by the government.
3. No mortgage fee upfront.

• HECM, or Home Equity Conversion Mortgage, is the most prevalent reverse mortgage type insured and regulated by the U.S. Department of Housing and Urban Development (HUD).

Home Equity Conversion Mortgage (HECM) is a reverse mortgage program insured by the Federal Housing Administration (FHA) that enables seniors to access a portion of their home’s equity. The HECM allows the borrower to withdraw cash in a fixed monthly amount, a line of credit, or a combination of both. A HECM can also be used to purchase the borrower’s primary residence.

Advantages of a HECM

1. No credit score requirements.
2. Tax-exempt funds
3. No monthly loan payments are due.
4. Lenient income requirements.
5. The ability to obtain funds based on their home equity.
6. Depending on their preferences, homeowners can get cash through a line of credit, modified tenure, etc.

However, HECMs also have some potential downsides. The borrower’s property must be their primary residence for most of the year, and they must repay the HECM if they sell the home or relocate. In addition, funding the costs of a HECM can reduce the borrower’s available net loan amount, and the loan contains several fees and charges, such as mortgage insurance premiums, third-party expenses, origination fees, interest, and servicing fees.

Apply For A Reverse Mortgage With Capital Home Mortgage Alabama

Capital Home Mortgage can help you obtain the funds you need to supplement your retirement income, whether you choose a reverse mortgage or an alternate loan option. As a direct mortgage lender in Alabama, we provide the state with the most competitive interest rates and lowest fees. Call (205) 352-1030 to speak with our Reverse Mortgage Specialists.

To be approved for a Reverse Mortgage, seniors must attend a counseling session assigned by the Department of Housing and Urban Development “HUD.” This counseling covers how the loan works, the costs associated with setting up the reverse mortgage loan, and its benefits. The loan is adaptable for seniors who don’t want to continue a monthly mortgage payment or for those who want to continue making payments. Alabama Reverse Home Mortgages can be used for a purchase or a refinance with or without cash being taken out.