Learn Reverse Mortgages

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Reverse mortgage is one of the many vehicles that individuals 62 years of age or older can use to convert home equity into cash. Nevertheless, for individuals, to fully understand reverse mortgages, their consequences and alternatives are very important. This article will provide an overview of reverse mortgages and discuss alternatives.

What is reverse mortgage?

Payment of monthly amounts (principal and interest) using a "normal" home loan. With each month, the amount you owe decreases and your home's assets increase. As one might expect, reverse mortgages work the other way around. With a reverse mortgage, you can convert your home equity into cash. You do not have to pay monthly. Cash can be paid to you in one or more of the following ways:

• as a one-off payment
• as a monthly recurring amount (cash advance)
• as your borrowed credit limit account as required [19659007] Through a reverse mortgage, homeowners continue to own their own homes and receive cash in whatever way they like. When they receive cash, their loan quotas increase, and their home assets fall. The growth of reverse mortgage loans cannot exceed the amount of home equity. In addition, lenders cannot obtain loans from anywhere other than the value of the home. Your other assets and the heir's assets are protected by the so-called "no recourse limits".

  Reverse mortgages, plus accrued interest, do have to be repaid. When the last owner of the property on the loan dies, sells the house, or removes the house permanently, repayment of the reverse mortgage occurs. Prior to this, loans did not need to be paid.

  Prior to the above conditions, there are other situations where reverse mortgagees may also require repayment of loans. These include:

  • The borrower is unable to pay the property tax
  • The borrower failed to maintain and repair his house
  • The borrower failed to put his housing insurance

  There are other conditions of default that may result in repayment of the loan. Most of them are similar to the default conditions of traditional mortgage loans (such as declaration of bankruptcy, donation or abandonment of housing, fraud or false statements, etc.).

  Reverse mortgages should not be confused with home equity loans or home equity lines, both of which are other ways to raise funds for equity in your home. Regardless of the type of loan instrument used, individuals must pay at least monthly interest on the amount of the loan they receive, or the amount they receive on their equity line.

  Reverse Mortgage Eligibility

  Homeowners must apply for a reverse mortgage and sign appropriate loan documents. In order to qualify for a reverse mortgage, the borrower must:

  • own house
  • at least 62 years old or older

  Reverse mortgages are usually "first" mortgages, which means they cannot be any Other collateral or loans, such as equity. Before seeking a reverse mortgage, one usually owns "free and clear" houses.

  Reverse Mortgage Amount

  The amount that an individual may receive through reverse mortgage is a function of many different factors, including:

  • Individual specific choice of reverse mortgage plan
  • type of cash advance ( For example, one-time payment and monthly payment)
  • The age of the individual (the older the individual, the more cash is obtained)
  • The personal family value (the more valuable the house, the more cash they receive)
  ] Types of Reverse Mortgages

  There are several different types of reverse mortgages. Some are more expensive than others. The types of reverse mortgages include:

  • Reverse mortgages provided by state and local governments (commonly referred to as "single-purpose reverse mortgages"). These are usually the cheapest reverse mortgages. These may be the most stringent for how to use the money received.
  • Federal Home Equity Conversion Mortgage (HECM). These loans are almost always cheaper than other private sector reverse mortgages, but they are more expensive than reverse mortgages obtained from state and local governments.
  • Other private-sector (proprietary) reverse mortgage loans.
  Alternative to Reverse Mortgages

  Although it often leads to negative emotional reactions, selling homes is an alternative to reverse mortgages. The proceeds from the sale can be used to lease or buy a smaller, more "aged" home, while the remaining money can be invested to provide additional income. This option should be at least considered and compared with reverse mortgages so that individuals can make informed decisions.

  Reverse Mortgage Advisory

  Consultation is required to obtain certain types of reverse mortgages. Consultation is required prior to obtaining Federal Home Equity Transfer Mortgage (HECMs). Even if a specific reverse mortgage does not require consulting, individuals considering reverse mortgages should seek advice from a consulting or qualified financial advisor.

  Good Sources of Information on Reverse Mortgages

  The American Association of Retired Persons (AARP) is an excellent resource for finding more reverse mortgage information. Their website (www.aarp.org) has extensive information on this issue. Information can also be found on the National Reverse Mortgage Association's website (www.reversemortgage.org), the HECM Resource website (www.hecmresources.org/index.cfm), the National Home Equity Conversion Center website (www.reverse.org), and federal trade. Committee (www.ftc.gov/bcp/conline/pubs/homes/rms.htm).

  
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