A reverse mortgage loans gives senior citizens the ability to convert the equity of their home without the need to pay any tax. They can do this while retaining the ownership of their home at the same time. If you are going to compare it to a conventional mortgage, you are not required to make any monthly payments and the repayment of a reverse mortgage is deferred up until the time when the borrower is not living in the property any longer. When the time comes when the loan is due, then the borrower has to pay the amount in full, together with the interest as well as the costs for finance closing.
Since the borrower is not required to pay monthly, the loaned amount grows over time and the remaining equity that you will get after selling your home and paying the full loan will get smaller. With this type of mortgage, the borrower will never be able to borrow an amount that is greater than the value of the individual’s property. People who get this type of loan can continue to be the owner of their homes and are entailed to take care of the property taxes, maintenance and insurance. If a borrower fails to fulfil these responsibilities, the loan might become due and billed in full.
Reverse Mortgage Eligibility and Requirements
- The Borrower – The borrower for reverse mortgage should be at least 62 years of age and it is necessary that the person occupies the home and consider it as the primary residence for most of the year. Aside from that, he or she should own the home outright or if there is an existing mortgage, the balance should be low enough so that the existing loan can be paid in full by using the proceeds of the reverse mortgage. It is required for the person who will borrow to attend a counselling session with HUD. This can be done by telephone or face to face, depending on the most convenient way for the borrower. It is a must for individuals on title to apply for reverse mortgage, attend the counselling session and sign the papers needed for the loan.
- The Property – The following types of properties are eligible for the reverse mortgage loan: Single Family One-Unit Properties, 2-4 Unit Owner Occupied Properties, Few Condominiums as well as Planned Unit Developments (For specifications, please feel free to contact the lender) and A number of Manufactured Homes.
The Benefits of Reverse Mortgages
This type of mortgage actually offers a lot of benefits to most homeowners. The funds that you will get from it can be used to pay monthly living expenses, all medical care needs, or you can even use it to fund a trip abroad. Due to the fact that payments can be structured as monthly payments to the property owner, you can use these mortgages as a good way of supplementing your retirement income.
How Do You Pay Off A Reverse Mortgage?
The reverse mortgage loan immediately becomes due at the time of the death of the last homeowner. If the heirs of the borrower wishes to keep the property, what they can do is pay off the loan or they can refinance the loan so that it becomes a standard home loan. Usually, the lender who is holding the reverse mortgage will make the loan due and then take ownership of the property. They will do this so that they can sell the loan and use the money to repay the mortgage. In cases where in the value of the home is less than the total cost for the mortgage, paying the difference is not the estate’s obligation.