What You Should Know About Reverse Mortgage

 

 

Reverse mortgages are mortgages that allow borrowers to access part of the equity in their homes. The home is typically the homeowner's largest asset, and recent estimates have estimated that there is $4.4 trillion in equity nationwide. These mortgages can be sold or transferred to heirs, saving both the borrower and the heirs interest and costs.

 

Before applying for a reverse mortgage, you should get professional counseling to ensure that you can afford the retirement loan. A financial assessment will allow you to determine whether you have enough money to cover living expenses, health care expenses, insurance, and taxes. Regardless of whether you intend to use the money for a specific purpose, additional income may help cover health care expenses and improve your quality of life.

 

Although you'll have to pay off your reverse mortgage loan at some point, you don't have to pay it back during your lifetime. When the mortgage is due, it can be paid off by selling the home or completing other repayment options. The lender will also advise you if you have to make repairs or sell the home.

 

Reverse mortgages are not intended for short-term financing, so it's important to be patient and understand that you won't be able to repay the loan in a short time. A reverse mortgage isn't a solution for everyone, but it can be a great option for most borrowers if you plan well.

 

The downside to reverse mortgages is that the loan can consume most of the equity in the home. However, reverse mortgage lenders want to ensure that a borrower doesn't owe more money on their home than it's worth. That's why most reverse mortgages have non-recourse clauses, which limit the lender's liability to the value of the home when the loan is due. This means that if you can afford the monthly payments, you can keep the home purchase and still retain reasonable equity in it.

 

Reverse mortgage lenders can charge closing costs. The fees are typically incorporated into the new loan amount, although there can be exceptions. Depending on the amount of equity in the home, closing costs can range from $8140 to $13,140. Some reverse mortgage lenders also charge a monthly mortgage insurance premium, which is 1.25% of the loan balance, which is added to the loan balance each month and increases when the loan becomes due.

 

Reverse mortgage lenders often require borrowers to submit a financial assessment. A lender may also require that you set aside money to pay insurance and taxes. Although you are not required to make regular payments, the interest accumulates and your balance will grow. Hence, the borrower may choose to make regular payments, but many choose to pay off accrued interest instead.

 

The total amount of mandatory obligations includes your current mortgage balance, all closing costs, and any delinquent federal debts. In addition to closing costs, reverse mortgages can also involve a line of credit that provides a guaranteed growth rate on unused funds. While reverse mortgages are often the last resort for elderly people, smart consumers can benefit from them. Here is a post with a general information about this topic,check it out: https://en.wikipedia.org/wiki/Commercial_mortgage.