Reverse Loan - How It Works And Is It Useful
When seniors think, whether they should take the reverse loan or not
, they should read the details, talk about this alternative a lot and to discuss with the experts. There are still too much guessing and rumours in the air. Who distributes these false stories and what are the benefits? Let us kill one reverse loan false feature: the bank cannot take your home after you have taken a reverse loan.
1. No Monthly Payments, The Lender Will Pay To You.
The target of the reverse mortgage is to arrange more cash money to a senior by turning a part of the home equity into cash money. The borrower has not to pay back monthly, but the capital, interests and all the costs will be paid back, when the loan will be closed. If the borrower has a usual mortgage left, he has to pay that away with the reverse mortgage loan. This will decrease his monthly payments.
The borrower can decide how the lender will pay to him. As a lump sum, as the monthly installments, as a credit line or as a combination of some or all of these. Most alternatives are tax free, because you have already paid taxes once.
2. More Expensive, But Special Benefits.
General comment about these loans is, that they are more expensive, than the usual mortgages. That is true, but think about the advantages. People, who urgently need more cash, can turn a part of the home equity into cash money without paying monthly back payments. If a senior thinks, that his financial needs are serious ones, is the price still too high?
3. The Qualification.
The reverse loan will be taken against the equity of the home. So a senior must own a home, which is his or her permanent living place and where he has equity left. The minimum age is 62. The lender will not ask the credit nor income information, because the loan capital, interests and all costs will be paid back, when the loan will be closed and the home will be sold. This happens, when the borrower will move away, sell the house or die. Altogether three borrowers are allowed, but all must meet the qualification, i.e. to be owners and to be 62 or over. They do not have to be relatives.
4. The Compulsory Counseling.
The law says, that before a senior can get a loan, he or she has to meet the counselor. This is an obligatory meeting, but it can also be very useful too. The counselor can guide about other alternatives and say, whether it is wise to take the loan. The counselor is not selling anything.
5. Is My Situation Typical?
The reverse loan is taken for the necessary payments. It is a long term commitment, so a senior must be serious and to use the money to pay the increased medical bills, home repair or some other increased obligatory payment. If your situation is serious and the home equity is the only source of extra money, then you need the loan.
by: Juhani Tontti
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