The 5 Key Reverse Mortgage Facts Before You Decide
The basic system of the reverse mortgage is, that it works in a different way than the usual mortgage, i.e
. it eats the equity of the home. This means that a senior will loan money against the equity of the home and will not pay anything back on the monthly basis.
1. The Reverse Mortgage Products.
HECM, or The Home Equity Conversion Mortgage, is the only reverse mortgage product insured by the federal government, actually they are insured by FHA, federal housing administration, which is a part of HUD.
FHA informs HECM lenders how much they can lend a senior and also limits the loan costs. FHA also guarantees that lenders will meet their obligations. A senior can take the loan as a lump sum, as a credit line, as monthly payments or as a combination of these. A maximum sum is $ 625.000.
2. Do The Research About The Lenders.
It is very important to guarantee, that you get the best reverse mortgage loan and that the lender is a trusted company. This you can make to discuss with your friends, especially with those who have taken the loan and by asking quotes from different lenders.
3. Take The Counseling Seriously.
The network of the federal counselors is very useful, because these people are independent people and specialized to guide the seniors about their financial needs. It is wise to prepare for this meeting by thinking thoroughly, whether you honestly need this kind of a loan and what are your financial needs.
4. The Application.
When you fulfil the application, it is important to decide how you want, that the lender will pay you. The alternatives are as a lump sum, as a credit line, as monthly payments or as a combination of these. You can pick the right alternative, if you have planned the needs you have.
5. The Repayment.
As said, the reverse mortgage loan will not pay back on a monthly basis. Everything will be paid back, when the loan will be closed, which happens when the home will be sold, the borrower will permanently move away or he will die.
So all the costs, including the interests, will be paid back in the closing process. Then the home will be sold and all the costs will be paid from the selling price of the home. The rest will be paid to the borrower or to the heirs. There is also the obligatory mortgage insurance. The target is, that if the selling price will not cover all the loan costs, the missing part will be paid from the insurance, so the borrower will never lose any other assets, than the home equity.
by: Juhani Tontti
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