In a reverse mortgage, the home is used as collateral. It is different from the various loans; here you don’t pay but receive money. Your loan keeps on increasing instead of decreasing. You don’t have to return the amount unless you move out of the home. The reverse mortgage gives you money for any and everything. This can be used to increase your savings. This is a complicated loan that will reduce your assets in the future. The amount you receive depends on the conclusion as to how long the loan will last. The higher the amount of equity in your home the more you can borrow. It is good if you keep paying your loan and the mortgage is paid off.

So, what is the relation between interest rate and reverse mortgage? A low rate of interest means a higher reverse mortgage.

Factors
Age is an important factor, wherein a young borrower will affect the amount you receive, while an older borrower may get more but lead to the youngest person leaving home at the death of an older person if the person has not been named in the contract.

Getting the money
Second is how to get the money; there are several methods to do this. One is the lump sum method that is taking the complete amount. In this way, you will be charged a fixed rate of interest. A monthly sum is paid throughout the lifetime of the borrower. The loan balance continues to grow.

Costs
Reverse mortgage charges fees and interest to lend you money. Do read the agreement specifications for hidden costs and do make comparisons before borrowing. The charges/fees are built into the loan amount; these reduce the equity of your home unless you sell the house and pay off the loan. An appraisal is made of the documents the lender reviews them, the loan amount and credit. Costs include originating fees; servicing fees takes a slice out of your income every month in reverse mortgage; insurance premiums have to be paid as this reduces the lender’s risk; interest on the money you have borrowed through the reverse mortgage.

Repayment
Monthly payments are not made, but the loan balance has to be paid if the borrower dies or sells the home. The total amount to be paid is the amount borrowed and the interest charged on the amount. The loan amount continues to grow as no payments have been made. Payment is expected when all the borrowers {named in the contract} leave home. Payment can be demanded if the property tax is not paid. Reverse mortgage gets repaid after the sale of the home. The difference between the value at which the house is sold and the mortgage value is kept by the borrower. If you owe more than the house sells at you, do not have to pay anything. If the heirs want to keep the home, they have to pay the entire loan amount even if the amount is higher than the value of the house.

Requirements

• You need a home—your residence and not a rental home.
• You should not be aged above 62 years.
• You should not owe the government any money.
• You should have adequate equity to borrow on a reverse mortgage.
• You need to continue to pay the property taxes and insurance premiums. This ensures the value of your property, and you maintain the ownership.
• You need to have a monthly income.
• For those who still owe money on their home, they need to pay it off to borrow on the reverse mortgage.

Insurance premiums
You have to pay insurance premium throughout the life of the loan mostly it is 5%.

Origination fee
These fees vary depending on the lender and the value of the home. Maximum fees are charged some do offer rebates, but for that, you will have to compare various offers, but borrowers rarely compare.

Servicing fee
This term is used to refer to the maintenance of the loan which includes billing and makes payments regularly, sending loan balance statements, payment of taxes, insurance premiums, and you have paid the loan proceeds.

Other fees
The third-party fees need to be paid as well which include appraisal fees, survey fees, title fees, title insurance fees, and credit check.

Key considerations to select a reverse mortgage interest rate
Lower interest rates add up to retain a better home equity position.
Shop around for other loans as reverse mortgage rates vary with a different lender. Fixed interest rates allow for a lump sum option while variable rates have flexible payment options.

Advantages of a reverse mortgage:

• No monthly payments
• no income required,
• no credit score required,
• no restrictions to use the money,
• tax-free income,
• you don’t need to owe money above the value of the property,
• no guarantee required,
• income for life,
• the government ensures that you do not lose your home if the mortgage value is more than the home value,
• if you sell your home, the mortgage is paid, and the extra equity belongs to you, borrow 55 to 70% of home value, the property still belongs to you.