What are reverse mortgages? For some people who don’t have any ideas about this, reverse mortgages are a type of loan that allows homeowners aged 62 years old and older to access part of their home’s equity as tax-free income.
It is a tool used as part of a person’s retirement planning. Different from a regular mortgage which the homeowners pay to a lender, while a reverse mortgage from the world itself reverses, the lenders pay the homeowner.
Whoever uses this type of loan doesn’t have to worry about monthly payments or doesn’t need to sell their home. Yes! That is right, it is an ability that allows a homeowner to access their home's equity without the burden of monthly mortgage payments. To be specific, they can continue to live in it.
But the loan must be paid until the borrower dies, moves out, or sells their home. However, accessing reverse mortgages has also a huge impact on the person’s estate planning. Understanding how reverse mortgages work and the possible impact on your estate planning is vital.
Aside from learning the basics, it is important to know the types of reverse mortgages to stretch the information you need about this loan.
Home Equity Conversion Mortgage (HECM)
The Proprietary Reverse Mortgage
Single-Purpose Reverse Mortgage
This tax-free income can be used for anything they want such as house repairs, vacation, security of savings, paying off bills, or buy a vacation house. Especially for medical expenses used, these are some acceptable used for the proceeds of a reverse mortgage. A cash-out refinance will ensure to help you with your financial needs, that is why some homeowners choose to use part of their home’s equity.
You’ll remain the owner of your home.
As say earlier, you’re still the owner of your own, and even though borrowed part of your home’s equity, you can still continue to live in it. There’s a common misconception about reserve mortgages is that the lenders take ownership of your home. This is false because as long as you comply with the terms of the loan and pay your property taxes and home insurance, you maintain the ownership of your home.
No monthly mortgages are required.
One of the best benefits of this loan is that you are not required to pay monthly mortgage payments, as long as you live in your home. Your remaining loan will be repaid once you sell your house, move to another residence, or when the borrowers permanently leave the house. The borrower must continue to pay for property taxes, homeowners’ insurance, and house maintenance.
Secured when house market declines.
A reverse mortgage is insured and run by the federal government, meaning if the loan’s end up amount is higher than the house value when sold, the government insurance will cover the remaining. Simply means that the loan will be in full using only the proceed of your home after selling and no other than that.
Several options of reimbursement.
We understand that every individual even senior has their own needs. In line with this, reverse mortgages offer many different options of reimbursement. Your choice of receiving your fund may be in full or partial sum, through a credit card, monthly payments, or a combination of these options.
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