The Benefits and Costs of Reverse Mortgage Loans
Many seniors will look blankly at you when you talk about reverse mortgage
. This is a sad thing because this loan can offer numerous benefits for the borrower. So here are the basic facts about the costs and benefits of reverse mortgage loans.
The Concept of Reverse Mortgage
A reverse mortgage allows you to take the equity of your primary residence and convert it into cash. This is the reason why reverse mortgage is a home loan that pays you instead of the other way around. You have no obligations to make repayments on the loan unless you sell the home or you pass away.
With a reverse mortgage, you will receive a monthly payment from the lender for the rest of your life. There are also other options available for you. You can choose to get a lump sum from the lender if you want. You can also opt to get a credit line so that you can draw cash when you need it. Essentially, a reverse mortgage gives full discretion to the borrowers on how they should receive the payments.
Understanding the Cost of Reverse Mortgage
Of course, a reverse mortgage entails some costs. One of the major costs involved in this loan is the interest that you have to pay. There are other costs as well but they may be bundled in the loan so that you will not have to pay out of pocket. The costs of reverse mortgage loan would be similar to the costs that you need to shoulder when you get conventional mortgages.
For example, you need to shoulder the origination fees and pay the upfront premium for mortgage insurance. The appraisal fee must be paid also and other standard closing costs that you will usually pay when getting any type of loan.
To keep the cash burden lower, the charges, fees, and associated costs can be financed by the reverse mortgage loan. The origination and lender fees for example must be paid so that your loan can be established. These fees compensate your lender or broker for putting the loan in place.
On the other hand, the appraisal fee is used to compensate the appraiser. A property appraisal is a must whenever you take out a loan. The appraiser will determine the exact market value of your home. The appraisal will be used by the lender to get a good idea of how much you can receive based on the actual worth of your home.
You also need to pay the mortgage insurance, title search, and other service fees and ongoing charges. Always remember that you can not take out a loan without paying the costs. The key is to know how much you need to pay and if there are options available for you before you sign the contract.
A reverse mortgage loan provides the borrower with a steady source of income during retirement. It will enable you to live a good life even if you are already out of job. In fact, many seniors are already getting the benefits of reverse mortgage.
The Benefits and Costs of Reverse Mortgage Loans
By: Rob Blake
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