subject: 5 Key Reverse Mortage Loan Features To Notice [print this page] 5 Key Reverse Mortage Loan Features To Notice
The market, i.e. the popularity, of the reverse mortgage loan has increased, which is useful, because that is the best way for the seniors to get more information about these loans. This article presents some of the main features, but a senior makes it wise, if he or she will talk to other seniors and with a counselor to get more detailed information about this.
1. The Reverse Mortgage Loan And The Taxes.
The reverse loan uses the money, which is once paid in and earned as a salary. This means, that a borrower has paid the taxes once, when he got the income. Usually the monthly income from the reverse loan is tax free. But it can happen, that if the whole sum is not used during the same month as received, the liquid assets of the borrower can mount so high, that he will lose his eligibility to the public social security.
It is wise to check this issue before signing any deals. The annuity advances can be partially taxable. The interest, which are charged, can not be deducted before they are paid, i.e when the loan will be closed. The mortgage insurance premium is deductable on the 1040 long form.
2. When The Loan Ends.
Usually the loan ends, when the last borrower will move away, sell the home or die. If a borrower moves from the property for more than 12 consecutive months and is not able to live in the property. In these cases the home will be sold and the loan capital, interests and all the costs will be paid away using the selling price or the mortgage insurance.
3. A Borrower Never Owe More Than The Value Of The Home.
This is very important principle. The guarantee of the loan comes from the value of the home plus from the obligatory mortgage insurance. This is the reason, why the lenders do nor care about the income information nor about the credit score. They will get their money in all cases.
4. Some Criticism.
Most used one is the claim, that the reverse loans are expensive. That is true, because the upfront costs are higher than what the normal mortgages have. However, a senior has to compare the costs towards the benefits he will get, his financial needs and other options. Another claim is, that many seniors do not fully understand all the terms. Well, maybe more studying is the simplest medicine for this.
One big factor is the compound interest. When nothing will be paid back until the loan will be closed, the interest factor will amount to a big amount. The interest will be calculated monthly to all expenses, not only to the capital, but also to other smaller upfront items and service fees. However, all these costs can be calculated upfront and a senior gets a detailed figures, which means that he will not get any bad surprises.
