What Is A Reverse Mortgage Loan
So the plan was simple
So the plan was simple. To use a part of the home equity and to turn that with the reverse mortgage into cash money either as a lump sum, a credit line, as monthly payments or as a combination of all or some of these. When many seniors still want to live in their old homes, the reverse mortgage offers two benefits. The senior can stay as an owner of his home, but to get much needed cash money from the equity.
The trick is in the back payment schedule. When with the usual mortgage a borrower must pay back a part of the capital and the interest on a monthly basis, the reverse mortgage works another way round.
As long as the borrower lives permanently in his home, nothing will be paid back until the home is sold. This happens, when the borrower will move away, sell the home or die. At this phase the home will be sold and a part of the selling price will be used to pay away the loan capital, interests and all costs. The rest belongs to the borrower or to his heirs.
1. Who Can Qualify?
The target is that all seniors, who are at least 62 and who own their homes, where they have equity left will qualify. Almost all home types are eligible, excluding some mobile homes. The federal counselor can guide about the details, which vary state by state.
2. What Is A Compulsory Mortgage Insurance For?
This is a very useful insurance. As said it is compulsory, which means that a senior cannot get the reverse loan without taking it. If the selling price of the home does not cover all the costs, when the loan will be closed the difference will be paid from the insurance. So a senior will never pay the reverse mortgage from his other assets, nor can he owe more than the value of the home.
3. What About Influences On The Medicaid?
It is wise to make clear, whether the reverse loan payments have influences to the Medicaid program. Usually if the reverse loan payment is used during the same month, than it is paid, there should not be influences on the Medicaid. However, the federal counselor can guide concerning the details.
4. How Many Borrowers Are Allowed?
Most seniors who want to use this opportunity are couples, who have lived in their home for a long time. When the reverse mortgage loan is always taken against the equity of the home, all borrowers must be owners and to fulfil the loan requirements. Altogether three borrowers are allowed and they have not to be relatives to each other.
5. How Much A Borrower Can Get?
The law has set the maximum amount, which is at this writing $ 625.000. The maximum sum depends on three factors. The age of the borrower, the appraised value of the home and on the interest rate. Generally speaking we can say, that the older the borrower, the more expensive the home and the lower the interest rate, the more he can get.
by: Juhani Tontti
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