Does A Reverse Loan Have Any Alternatives
Unlike the usual mortgage, the reverse loan has no monthly payments
, but the capital, interests and all the costs will be paid back, when the reverse loan will be closed, not earlier. If you happen to have a usual mortgage left, you have to pay that away with the reverse loan.
This means more disposable cash money every month. The closing time is, when the last borrower will sell the home, move away or pass away. Then the home will be sold and all the costs will be paid away using the selling price. If that cannot cover the whole amount, the obligatory mortgage insurance will do that.
1. A Senior Will Decide, How The Lender Will Pay Him.
Sounds funny, but that is true. A senior decides, whether he will take the money as a lump sum, as monthly payments, as a credit line or as a combination of all these. The financial needs of the senior dictates the payment ways and he can use the money, how he will.
2. The Age Of The Borrower, The Home Value And The Interest Rates.
These are the factors, which will determine the amount of the reverse loan. Because the loan is taken against the home value, no income nor credit information is asked. We can generally say, that the older you are, the bigger the appraised value of the home and the lower the interest rate, the more a senior will get. The maximum is $ 625.000.
3. Altogether Three Borrowers Are Allowed.
Many couples will take the reverse mortgage together, but the borrowers have not to be relatives. If up to three persons will take the loan, all of them must fulfil the qualifications and be the owners of the home.
4. The High Costs.
A senior may think, that everything is so cheap, because nothing will be paid until after several years. However the costs can raise to big amounts. The origination fees can be as high as $ 6.000. The accrued interest will be added to the balance during the whole running time and the closing costs, service fees and mortgage insurance premiums can be thousands of dollars. It seems, that the reverse loan should be taken as a last resource.
5. Finally, What Are The Possible Alternatives?
Do you have any cash in your life insurance, which is not needed or do you wait an inheritance? Do you have shares, which you could sell? Are you eligible for a low-income help? Could you refinance the present mortgage with the present low interest rates? Could you sell the home and to move to a cheaper area and to a smaller home? Could you rent away a part of your home? And finally, could you sell your home and to rent it back? As you see, all of these alternatives try to use your present equities without taking any new debts.
Does A Reverse Loan Have Any Alternatives
By: Juhani Tontti
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