A California reverse mortgage is a loan that pays you. It's called a "reverse mortgage" because a traditional loan is also referred to as a "forward mortgage". A forward mortgage, as you know, gives you a lump sum of money and then it's repaid in periodic payments. Your home loan is such a loan. You were paid a lump sum of money, you used the money to purchase a home, and you repaid the money monthly. The interest accrued was figured into the monthly payments and the term of the loan. In a home loan, the property is usually the collateral. If the loan goes into default, the ownership of the property is the recourse of the lender.
In a California reverse mortgage, most of the variables are the same as a forward mortgage except for:
- You already own the home.
- The monthly payments come to you.
Sounds great! How do I get a California Reverse Mortgage?
Not everyone can get a reverse mortgage. You have to be at least 62 years old and your home must be nearly paid off or owned outright. If you are 64 and your spouse is 59 and you are both joint owners in the home, the one who is 64 has to assume sole ownership.
Is it hard to get a California reverse mortgage?
It's not hard but it's confusing. The options are numerous. There are federally insured loans, lender insured loans, and uninsured loans (we wouldn't recommend getting an uninsured loan). The terms for the loans vary from lender to lender. There are also costs involved that are the same as a forward mortgage: closing costs, origination fees, etc.
Before you start shopping for a California reverse mortgage, you should speak to a loan counselor to see if it fits your situation.
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