Reverse Mortgages: Cashing in on Santa Cruz HomesPosted by Lauren Spencer on Monday, May 4th, 2009 at 1:01pm.
Many older Americans are turning to reverse mortgages to convert part of the equity in their Santa Cruz homes into cash. With reverse mortgages, loans don't have to be paid back to the lender until the homeowner dies, sells their home or no longer uses it as their principal residence.
Three Types of Reverse Mortgages
There are three basic types of reverse mortgages: single purpose, federally insured, and proprietary. For all three types, you need to be at least sixty-two years old and live in your home. The proceeds are generally tax-free and many have no income guidelines.
1. Single purpose - Generally, single purpose reverse mortgages have very low costs. They're offered by state and local government agencies, as well as nonprofit organizations. As the name suggests, this type of reverse mortgage can only be used for one purpose, specified by the lender. That purpose is usually for home repairs, home improvements or property taxes. To qualify, your income has to be low or moderate.
2. Federally insured - Also known as Home Equity Conversion Mortgages, or HECMs, federally insured reverse mortgages are backed by HUD. They're usually more costly than other loans, and the up-front costs can be high. They're more expensive if you stay in the home for just a short time, but they're also widely available, have no income requirements and can be used for whatever purpose you want to use them for.
3. Proprietary - Although backed by private companies, proprietary loans are much like HECMs. The largest difference is that HECMs generally provide a larger loan advance with a lower total cost than proprietary loans. However, those people whose Santa Cruz homes have a higher real estate appraisal value might get a bigger loan advance from a proprietary reverse mortgage.
People may choose to take out reverse mortgages for home repairs or improvements, or because they need help paying property taxes. Other reasons include paying for healthcare expenses, paying off a current mortgage, or supplementing retirement income.
Before taking out a mortgage of any type, remember to read the fine print. Many people have lost their Santa Cruz homes because they didn't fully understand the terms. If necessary, have a professional explain them to you.
When you or your loved ones work with me as your Santa Cruz real estate professional, I'll refer you to a mortgage expert who will help you select the best mortgage for your financial situation. Call me today at 831.662.6522 or email me at firstname.lastname@example.org
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