Reverse Mortgages Require Home Equity

Many Americans are still waiting for their home values to rise. About a quarter of people who have mortgages are underwater on them, or owe more than their homes are worth. Can you get a reverse loan if your home has lost significant value?

No Home Equity, No Reverse Mortgage

Reverse loans are approved for people who have enough home equity to convert to cash. The amount that can be borrowed depends upon your home’s appraised value. Without equity in your home, you can kiss a reverse home mortgage good-bye.

Appraisals Are Important

What if you still have some equity although home values are falling in your area? You may qualify for a reverse mortgage, but not as much as you hope to get. In general, the amount you qualify to borrow is determined by your age, your home’s value, and current interest rates.

Talk with a qualified housing counseling to discuss reverse mortgage guidelines and determine if it’s worth it to take out a loan. Decide why you need a loan in the first place. If borrowing with a reverse loan won’t help, you may be better off not applying for one.

Reverse Loan Payout

For some homeowners it makes more sense to postpone borrowing with a reverse mortgage until the local housing market recovers. Older borrowers also receive more money, so waiting a few years can put more money in your pocket even if housing values don’t change significantly. Contact reverse mortgage lenders to compare quotes for borrowing at different ages.

When You Can’t Pay Mortgage Bills

When a reverse mortgage isn’t the right option, investigate other alternatives. Your housing counselor should be able to discuss other ways you may be able to improve your financial situation. If you struggle to make monthly payments on a mortgage, contact your mortgage lender to discuss the possibility of refinancing or getting a loan modification.

This entry was posted on Monday, February 15th, 2010 at 3:52 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.