Financing your retirement has never been so easy! Supplementing your retirement right under your own house with the reverse mortgage. Learn more about the different types of these loans.
Despite the concept and practice of reverse mortgages, it is best to understand how this type of loan works. It is an agreement which allows 62-years old homeowners to borrow part of their home’s equity.
When you apply for a reverse mortgage loan, instead of the homeowners make payments to the lender, the lender makes the payments to the homeowners. The homeowner gets to choose from many reimbursement options on how to receive the loan amount.
Home equity is the value of your house, which is the actual market value of your property minus the mortgages you still owed. Or if on the other hand, if a homeowner already pays the full amount of the property, then the total market value of the property will be the available home equity he can borrow.
When your loan is approved, the money you’ll receive is tax-free. In line with this, the borrower will remain the owner of the property. The payment for the loan will be, when the homeowners decided to sell the house, the home’s sale will go to the lender to repay the reverse mortgage loan. Or in some instances when the borrower dies, the heir can choose to pay the mortgage to keep the home themselves. In addition, any sales beyond the amount borrowed will proceeds to the homeowners, if still living. In short, the home is collateral for a reverse mortgage.
To be eligible for a reverse mortgage, there are certain criteria a homeowner must meet and follow:
The borrower must be 62-years old or older.
The homeowner must have sufficient equity in the house - normally, about 50% of the required amount varies by lender.
The borrower must participate in a counseling session led by a HUD-approved counselor.
The borrower must go to a financial assessment to ensure that you are keeping up your property taxes, homeowner insurance, and other mandatory legal obligation.
The home must be your primary residence.
The property is well-maintain or in a good condition and meets the FHA standards.
Your house must be a manufactured home (single-family home, a condominium, or townhouse) not a mobile home.
Although there are several numbers of good features that come with a type of loan, a reverse mortgage can be appealing for people who want or need to secure retirement funds. There are also some good points to consider before making a decision. You must know that a reverse mortgage are:
As states above, the borrower must maintain the house and continue to pay property taxes and home insurance. If you do not keep up with the expenses, your loan may come due.
Since reverse mortgage gives access to your home’s equity, you’ll decrease your equity which could be an excellent choice source of retirement funds. Apart from this, you’ll increase the amount of debt.
Fees and other closing costs associated with the loan can be high.
Making a final decision is tough especially if you need to secure your retirement and future. Before making a decision make sure to weigh the pros and cons of a reverse mortgage. Considering a loan using a reverse mortgage? Call our expert today!
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