Home Loan Programs Available To Seniors
Homes are central to everyone’s daily life, and as a senior, it’s no different. Whether you are looking to buy a new home, downsize your living situation, move to a retirement community or get equity out of your home, there are several options for you to explore.
Older consumers are carrying more mortgage debt than in previous year. According to Consumer Financial and Protection Bureau, around 30 percent of homeowners aged 65 and older carried mortgage debt in 2011. This number increased from 22 percent in 2001.
This is the traditional mortgage that you probably most familiar with and had on your current or previous home. It can last 5, 10, 15, 20 or 30 years. Qualifying for it is dependent on your income and your credit rating.
A second mortgage is in addition to your primary mortgage for a smaller amount. Second mortgages generally have a higher interest rate. If there is a problem such as foreclosure, the first mortgage has priority over the second mortgage for repayment.
This is when you take your current mortgage and refinance it to change the type of loan, change the rate, update the length of the loan, or any combination. This will either help lower your payment or shorten the length of your mortgage. A longer loan term results in lower monthly payments.
This mortgage is available to seniors 62 and older allowing them to convert part of the equity in their home into cash. Each month the amount owed to the bank will rise. At the end of the term, the bank owns the home. Reverse mortgages can also present problems if the market value of the home decreases. They also carry high fees. You can choose monthly payments, a credit line or a large lump sum. This can help relieve large amounts of debt.
Home Equity Line Of Credit (HELOC)
These loans use the home equity as collateral for the loan. It is a loan that the borrower takes out in small sums against the equity of his or her home. One of the advantages of this type of loan is that a person can take out as little or as much as they need and they only have to pay the interest on the loan at first.
Home Equity Conversion Mortgage (HECM)
The HECM is similar to a reverse mortgage except that it is regulated by the Federal Housing Authority. The costs and fees are generally worked into the loan. This mortgage is regulated by the Federal Housing Administration (FHA). HECM loans have the best rate of reverse home mortgages and have more choices for payment.
Reverse Annuity Mortgage
This loan is also similar to a reverse mortgage and provides income to senior citizens over time. Seniors can borrow home equity to use for repairs, bills, income or other purposes.
There are many types of loans available to senior citizens and each satisfies a different need. Make sure you do your research. The National Council on Aging provides a quick survey which can help you determine the best option for your situation.