Reverse Mortgage, What is it?
A reverse mortgage program is typically a loan which caters to senior citizens ages 62 and upwards. This basically allows them to loan money and place their home equity as collateral. Most of the time, seniors tend to use this program as a means to help them with living expenses, medical needs and other financial problems.
This program converts your home equity into a lump sum, a series of payments, or a line of credit. You can find out home much you can get for your home equity with a reverse mortgage calculator. There are many versions of this product depending on the state that you are in, but generally they all work in the same manner. You keep the title of your home when the lender grants the mortgage. But when you die or move out or sell the property, you have to pay the lender the principal amount and the interest tied to the loan. Like any financial decision, choosing this type of program comes with its own risks and downsides. When you do choose to get a reverse mortgage loan, you need to carefully asses yourself and asses to avoid it becoming a total nightmare. You need to consider the outcomes, the consequences; will you be able to pay it in the end? Will your heirs be able to pay the dues? These decisions need careful assessment. But on the bright side, going through this program will essentially help you in your financial needs.
Why do people release equity through reverse mortgage?
Essentially there are many reasons why people would resort to the program. But here are some of them for your reading pleasure.
-To receive additional income
– To help with living expenses
-To buy a car or something of great value
-To upgrade, renovate or repair a home
-To help family or grandkids
-To pay for a vacation
Whatever the reason maybe, this program will definitely help seniors with their financial needs. Provided they know what they are doing. Reverse mortgage calculators could come in handy during these situations.
Proceeds from a reverse mortgage
You can choose between the following on how you would want to receive your loan.
-Lump sum or in cash
-As an annuity with regular cash payments at a set interval
-A line of Credit (similar to that of home equity line of credit)
-A combination of them
You can choose how the money will be distributed to you when you choose to partake in the program. So choose carefully and always remember to think things through.
Taxes and insurance
The borrower remains entirely responsible for the property and still continues to hold the title. This includes physical maintenance and periodic assessments of your property. You are also responsible in paying the insurance and taxes tied to your ownership of the home. This of course, also depends on the type of money distribution you want and may differ depending on the state that you are in. So calculating the money you can get from this loan is also important. Try using Online Reverse mortgage calculators to help you find out the possible amount you can get.
What happens when the loan becomes due?
Mostly all reverse mortgages must be paid. When the owner leaves permanently or dies, the estate/heirs can either sell the property to pay off the loan or repay the loan or keep the house. If the estate chooses to sell the property, and the property value sells for less than the amount needed to pay the loan, the estate is not entitle to pay the difference. Only the property or home is used to pay off the debt. However if the property sell for more than the amount needed to pay the debt, the remaining balance is then returned to the heirs.