Reverse Home Mortgage! Cash From Your Home Equity
For a senior it is important to understand the key features of the reverse mortgage loans
, before he goes on, because some lenders have done false offers trying to utilize the seniors, who do not have a full understanding about these loans.
If you think the differences between the usual mortgages and the reverse loans, they are many. With the usual mortgage, the borrower has to have enough monthly income compared the loan sum and he has to pay back every month. With the reverse loans the lenders pay to borrowers and all the costs, interests and the capital will be paid back at the closing of the loans.
1. How Much Will I Get?
Actually the loan amounts depend on the interest rate, the appraised value of your home and on your age. So you will get more the older you are, the lower is the interest rate and the more valuable is your home.
2. What Happens, If I Cannot Pay?
There is one good thing. These loans include obligatory mortgage insurances. The idea of these insurances is to guarantee two things. First, that if the selling price of your home do not cover the whole sum of costs, the insurance will pay the difference.
This means that you will never owe more than the value of your home. Second, the lender gets his money for sure. The mortgage insurance is very important, if you think a risk that you could otherwise loose your home. This special insurance guarantees, that it will never happen.
3. What Types Of Loans There Are?
The reverse mortgage loans are divided into three groups. In the first group there are the so called single purpose loans, which only some states, governments and non profit organizations will grant. These reverse mortgage loans are the cheapest ones. They are used for some specific purposes only, like for home improvements.
The second class is the federally insured loans, HECMs, which are backed by the HUD. These are slightly more expensive ones, but have no income or medical limitations. Owing to higher upfront costs, these loans are recommended for a longer term use. The federal counselor meeting is compulsory. The proprietary reverse mortgage loans are backed by the private companies.
4. What Are The Costs?
Usually the reverse mortgage loans offer tax free income and they have no influence on the Medicare or social security. HECM allows the borrower to live in the nursing home for 12 months before the loan must be repaid.
Normally the lenders charge the origination fees, mortgage insurance premiums and servicing fees. All these fees will be paid when the loan will be closed and the home is sold. A borrower can select either the fixed or the variable interest rate.
But remember, that you as the home owner must pay taxes, insurance, utilities, fuel, maintenance and other expenses. If you do not pay taxes or insurances and do not keep the home in good condition, your reverse loan can be due and payable. When the loan is paid, you can deduct the interests in the taxation.
by: Juhani Tontti
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