Things You May Not Know About A Reverse Mortgage
After spending a lifetime working at a job or raising a family
, senior citizens deserve a chance to relax and enjoy their retirement years without financial worries. But the reality is, many seniors find themselves pinched between dwindling financial resources and a higher cost of living, including hikes in medical and prescription costs. Other seniors who may have had lifelong dreams of an exotic trip or other special goal may find they do not have the resources to fund their dreams. Fortunately, senior homeowners may be able to tap into the equity in their homes with a reverse mortgage, realizing the cash they need to make their dreams come to fruition.
The popularity of reverse mortgages has risen dramatically over the past few years as more and more seniors decide to reap the rewards of their labor and tap into the years and years of equity theyve built up in their homes. Still, there are many seniors who dont know about all the advantages of a reverse mortgage, or whether this unique loan vehicle is right for them. The following list will address some of the more common questions surrounding reverse mortgages, and help you decide if a reverse mortgage is right for you or your loved one.
How does a reverse mortgage differ from a home equity loan?
Like a home equity loan, a reverse mortgage allows homeowners to tap into the equity they have in their home. But unlike a home equity loan, a reverse mortgage does not require any repayment over the life of the loan. The homeowner receives the cash from the loan, but the loan (plus interest) does not need to be repaid until the homeowner leaves the home permanently. In addition, home equity loans and other traditional mortgages are income dependent that is, you must have a certain level of income to qualify for traditional mortgages, including home equity loans. Reverse mortgages are available to qualifying seniors regardless of income level.
Are reverse mortgages safe?
Like other mortgage vehicles, reverse mortgages are federally insured and overseen by the U.S. Department of Housing and Urban Development. In addition, homeowners seeking reverse mortgages must receive financial and mortgage counseling from a HUD-approved reverse mortgage counselor, who will provide you with consumer information to help ensure you make an informed decision.
How do I know if Im eligible for a reverse mortgage?
If you are 62 or older, are a primary homeowner, live in the home, and own the home outright, you can qualify for a reverse mortgage. Even if there is an existing mortgage on the home, you may still be eligible for a reverse mortgage, as long as the proceeds are used to repay the existing mortgage when the reverse mortgage is received. If you live in a duplex or multiplex which you own, you can still be eligible for a reverse mortgage. Townhomes, condominiums, and some manufactured homes are also eligible for reverse mortgages, as long as they are FHA-approved.
Can the bank force me to move?
You remain the owner of the home and retain title to your home throughout the life of the reverse mortgage. Unlike traditional mortgages and home equity loans, you cannot be foreclosed on due to missed payments (since there are no payments to make). Just as you did before you received a reverse mortgage, you must continue to make property tax payments, and keep your home insured and maintained.
If the loan payments run out before I leave the home permanently, can the bank force me to move?
No. As noted above, you remain the owner of your home. Also, regulations prevent you from ever owing more than your home is worth.
Will my heirs become responsible for my debt?
When you no longer use your home as your primary residence, you or your heirs will repay the loan principal plus any accrued interest. If you or your heirs desire, the home can be sold and the proceeds used to repay the loan, or the home may be able to be refinanced and the loan repaid. Any remaining equity or other assets you may have are not affected by the reverse mortgage repayment process.
Must I receive all the money in a lump sum?
You have several payment options when you receive a reverse mortgage.
Line of credit: payments are issued when the borrower desires, and in the amounts requested by the borrower, until the loan amount is reached
Tenure: equal monthly payments while one or more borrowers occupy the home as the principal residence
Modified tenure: combination of tenure (monthly payments) and line of credit
Term: equal monthly payments for a specified period of time
Modified term: combination of term and line of credit
Reverse mortgages are a viable source of income for seniors, regardless of their income level or home value. Understanding your options can help ensure you get the most of your mortgage and all of its potential benefits.
by: mor123
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