1 February 2008 - 13:20Reverse mortgages
What are Reverse Mortgages?
Reverse Mortgages refer to a special kind of home loan wherein a homeowner has the option to convert a fraction of the home equity into cash money. This means that the actual equity accumulated through years of paying your home mortgage can be paid to you. However, it differs in a way from a conventional home equity loan or second mortgage wherein there is no obligatory repayment until the time that the borrower no longer uses the home as their primary and main residence. Meaning, there is no need for loan repayment as long as you continue to live in the house and maintains tax and insurance payment up-to-date. To make it more easily understood, the mortgage loan must be repaid in case you die, sell your home or by the time that you no longer want to keep the home as your principal residence. Reverse mortgages is the perfect alternative for those individuals who are house-rich but are very much lacking in cash to remain and stay in their home at the same time fulfill other monetary commitments.
You must be at least 62 years old and living in your own home in order to qualify for reverse mortgages. Usually, reverse mortgages? proceeds are tax-free provided that there is no annuity feature in the mortgage agreement. Another advantage of applying for a reverse mortgage is the fact that there is no income restrictions included in the application guidelines.
Reverse Mortgages Features
Before you finally make your mind up to apply for reverse mortgages, spare enough time to think and ponder on the following information about reverse mortgages to be aware and be appropriately knowledgeable of these details:
- As with all kinds of loans, the amount you borrowed will normally grow as times go on. Interest is calculated on the outstanding balance and is usually added to the total money you owe each month. This will actually mean that the sum of your debt continuously swells and multiply due to the interest that has built up on the loan.
- Since you are still the one holding on the title of your home, you are still the person responsible for insurance, taxes, and other expenses related to the property. For instance, you neglect to keep up with paying your property taxes; there is a greater chance of risk like your home becoming unpaid and due.
- Reverse mortgage lenders charge fees like origination fees and closing costs. They also charge service fees during the mortgage term and they are the only one responsible for setting the costs of these fees.
- Reverse mortgages may either have fixed or variable rates, however most of the time they are variable so they keep on changing from time to time depending on the condition of the market.
If you are planning to apply for reverse mortgages, you should be cautious and vigilant about the necessary factors that you should emphasize and dwell much attention into. Shop around and get much information to help you out in deciding if reverse mortgages are the perfect option for you.
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