Here's the plan
In this mortgage, homeowners give up some equity of their homes for huge amounts of cash, often for retirement requirements, medical bills or even children’s expenses. This mortgage is popular with senior citizens [62 years and above]. The borrow does not need to make any loan payments because the loan is due when the borrower dies, moves or sells the home. Before borrowing, it required the borrower to structure the transaction so that home value does not exceed when paying the borrower and will not be held accountable for paying the difference if the loan becomes bigger than the home value.
As a borrower, you get to choose which method of payment works best for you. So that the homeowner doesn’t pay any upfront fee, the interest is rolled into the loan balance. The proceeds from the home sales go to the lender to repay the fees, reverse mortgage principal, fees, interests and mortgage insurance when the homeowner dies or moves.
There are different reverse mortgages which include;
Single-purpose reverse mortgages
Usually offered by local, state and non-profit agencies. Since it is backed up by the government it is quite manageable as homeowners are expected to pay less interest rates. These loans do not have to be repaid until the home ownership changes. If the homeowner stops maintaining homeownership insurance the loan automatically becomes due or if the property is condemned by the city.
Home equity conversion mortgages
This loan comes with high upfront costs and is likely to be more expensive as they are federally insured. This loan can be used for any purpose making it the most used reverse mortgage. The homeowner should be properly educated on the costs, responsibilities involved and payment options before taking up this loan. These counselling sessions are paid inform of loan proceeds. You are allowed to choose between different payment methods.
Proprietary reverse mortgages
They are backed by private lenders and are beneficial to homeowners with high valued homes. Counselling is required before applying. There are no monthly or upfront mortgage insurance premiums. Before making a choice, compare and contrast interest fees in different proprietary reverse mortgage lenders.
When choosing to receive lump sums you can choose to receive proceeds in different ways which include;
Equal monthly payments
Line of credit
Equal monthly payments plus a line of credit
Term payments plus a line of credit.
Before making your decision, read the assigned documents and be aware of scammers.
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The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.