The greatest worry among seniors is how they can live a more financially care free lifestyle, despite the not earning enough money on a monthly basis. On the other hand, we see mortgage lenders calling on seniors to access the equity in their homes through a reverse mortgage. The promise is that reverse mortgages will eliminate the senior’s financial worries giving them access to monies that they can use to finance a better, more care free daily lifestyle.
This sounds simple as tempting but we want to make sure you know the ins and outs. A reverse mortgage may be AWESOME for you! On the other hand, it may not depending on your situation. That’s why in this post, we reveal the reverse mortgage secrets no one has told you. Keep reading to discover the following revealed secrets:
How does a Reverse Mortgage Work?
Some people are familiar with the term reverse mortgage, but they do not know how exactly the reverse mortgage works. In simple terms, the reverse mortgage is a type of loan available to seniors who are 62 years or older. The reverse mortgage was designed to help seniors regain financial stability, by tapping into one’s home equity.
In that regard, the amount that is available to the borrower is dependent on the home equity available at the time of borrowing. The borrower’s age is also considered when determining the amount of money to lend the borrower.
Upon approval, the borrower is at liberty to choose the cash disbursement method. This can be opting for the lump sum, the line of credit, monthly payments or a hybrid of the payments method mentioned above. Lastly, the borrower is not obligated to make monthly repayments on the reverse mortgage. The amount falls due upon moving home or death of the borrower.
Will I Still Owe the Property?
A common misconception is that the right to homeownership ceases upon receiving the reverse mortgage proceeds. That is never and has never been the case. The borrower remains the owner of the home, although the lender has a lien on the property, just as remains the case in the traditional home loan.
However, there are some restrictions as to when the right to homeownership applies in the case of reverse mortgage. If you opt to move out of the property and live away for more than 12 months, the right to ownership of the home ceases with immediate effect. Another instance is when the borrower has stopped paying the monthly maintenance cost. Therefore, it is important you adhere to the reverse mortgage terms regarding the property ownership to continue enjoying the right to have the key to your home.
Why do People take the Reverse Mortgage?
There are different reasons why people apply for the reverse mortgage. These reasons range from wanting to buy another home, to pay off an existing loan, or to comfortably afford their daily living expenses. Ideally, the reasons why one would apply for the reverse mortgage will vary from one person to another.
What are the Current Interest Rates on a Reverse Mortgage?
Like conventional loans, areverse mortgage borrower is expected to pay some interest with every loan that they take. The interest rate fluctuates depending on the prevailing market rates. Since a reverse mortgage does not require monthly repayments, the interest accumulates over the life of the loan. In that regard, as the life of the loan increases, the amount of interest might eat up the remaining equity in the home.
The current reverse mortgage rates are:
Check the interest rates with your reverse mortgage loan officer, to ascertain the total cost of the reverse mortgage.
Will I have to Repay the Loan?
A reverse mortgage is a good option when it comes to financing retirement life. Remember that the loan falls due when the borrower decides to move out of the property or when the borrower has passed away. However, some opt to make the monthly reverse mortgage repayments, just to reduce the financial burden when you need to sell the property to repay the loan. In case there is no repayment that has been made on the reverse mortgage, upon death the property owner, becomes the lender.
Why Should I Attend a Counseling Session Before Applying for a Reverse Mortgage?
To obtain a reverse mortgage approval, you are required to attend a counseling session with HUD-certified counseling. This is an important session that the intending reverse mortgage borrowers should and must attend.
A reverse mortgage is a good financial solution that is tailored to meet the requirements of the seniors. This is in terms of financing everyday life, paying for medical bills and financing different projects. Talk to an experienced mortgage lender to find out more information on reverse mortgage.
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