MORTGAGE Blog & ARTICLES
All about Reverse Mortgages
Reverse mortgage is known as home loan that offers cash payments or amounts based on the home equity. Most of the homeowners are deferring the payment until the day they die, move out or sell the home. Here is information you should understand regarding reverse mortgages or senior mortgages.
Pros of Reverse Mortgages
• Can be a tax-free income as long as your primary residence is your home. This is guaranteed by your Local Federal Government.
• You can choose or change your loan any time in a form of credit, monthly checks, cash out or combination of those depending upon what remains.
• Your remaining credit line will grows every month by half percent of your current interest rate.
• Compare to an equity loan, there is no income, health qualifications, or credit
• Perfect for senior citizens whom didn’t want to leave their home over the years to avoid emotional disturbances and remain in a familiar community.
• Can pay off your existing mortgages or loans. They will be transferred to your reverse mortgage balance.
• No pocket cost except for the appraisal fee and HUD counseling.
• As long as you remained in your house, you cannot be forcibly out of your house. No matter how much you owed in reverse mortgage as long as you pay real state taxes and the insurance for homeowners.
• You’ll never owe reverse mortgage more than the worth of your home. If you decide to pay your loan and retain the house or if your heirs decided to pay the debt to retain the house, full mortgage repayment will be due.
• Reverse mortgages have different safeguards: fees limitation, capped of interest rates, HUD counseling, no maturity date or cannot due on borrower’s lifetime, asset protection for non-recourse loans.
• A financial tool that can help your heirs to avoid tax of real state.
• Your heirs can claim an interest on income taxes after your death.
Take note all the benefits you can get in reverse mortgages. On the other hand, there are also Cons that you should be aware of and these are the following:
Cons of Reverse Mortgages
• This can cost you pricier in closing cost. There’s FHA insurance and the additional cost for closing. Those additional cost falls under FHA mortgage.
• Can reduce inheritance for your grandchildren and children. This is a rising debt compared to equity loans in which equity increases as payments were made.
• Selling your home can be worth more return of money rather than reverse mortgage.
• Using reverse mortgages for short term purpose is not a wise decision such as moving out of the house 5 years after making the mortgage.
• Failure in paying the real state taxes and homeowner’s insurance will require a full repayment of the debt.
• Not residing in your primary house for 12 consecutive months will make the reverse mortgage become due.
• If your heir decided to keep the house, they are required to pay the full balance at due.
When not to get this kind of mortgage?
• If you need cash, an equity loan is a better option
• If you need cash for repairs of your house, a community loan is a far better option
• If you are ill and living being assisted or nursing home do not buy reverse mortgage
• If you plan to inherit your house to your children, reverse mortgage is not an option.
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