Monday, March 14, 2011

What you need to know about a Reverse Mortgage

Seniors sixty-two and older may well be in luck, even in these harsh economic times, due to an interesting little thing called a “reverse mortgage.”

A reverse mortgage not like the mortgage you took out to pay for your home – you don’t pay anything but interest to the lender, because you are essentially borrowing money from yourself. What does this mean? Well, in a reverse mortgage, you’re extracting the value or “equity” of your home and converting it to money that you can use. This might seem a little shady – what happens when you’ve used up all your equity? Will the lender take your home from you?

In a word, no. A reverse mortgage isn’t like that at all. With a reverse mortgage, you receive either a lump sum right now, or a payment once a month from now until you stop living in your home (you pass away, sell your home, go into a nursing home, or otherwise aren’t there for an extended period of time). On the sale of your house, you or your heirs will receive whatever remains of your equity, minus fees and interest.

However, you have to be careful and do your research – there are several different types of reverse mortgage, and it’s your decision, in the end, which one you choose. Among these different types of reverse mortgages, there are:

Single purpose reverse mortgages: these are the least expensive, and so are most suited for those seniors with the lowest income. However, this also means that these mortgages give you access to the least percentage of your home’s equity – about enough to cover some of your property taxes or home maintenance.

Home equity loan or line of credit: if you can afford to make a small payment each month and have good credit, this could be the reverse mortgage for you. It provides you with more money to use, while still remaining fairly cheap.

HECM Standard and Saver reverse mortgages: these mortgages are backed by the Federal Housing Administration, so you can be absolutely certain they’re legitimate. The Standard version takes 2% of your equity off the top, but you get access to 20% more of your equity overall than you get with the Saver mortgage, which only requires .01% of your equity to get.

Jumbo reverse mortgages: these are for seniors with very high end homes, because there is a cap to the HECMs mentioned above. However, they are not nearly as regulated, and could be considered a risky gamble.

If you’re thinking about a reverse mortgage, but still have questions, explainreverse.com can help you. Their team of specialists will help you negotiate with your lenders and decide what the best mortgage is best for you and your home.

For more information, please visit www.explainreverse.com

2 comments:

  1. Reverse mortgage is a nice financial instrument dedicated to the senior citizens in the country whose age is 62 or more. This helps the senior citizens who could not have accumulated substantial retirement fund but who have substantial equity in their homes. It is like borrowing from oneself and the lender the homeowner would not have to make monthly payments to the lender. Instead, the lender is responsible to make payments to homeowner but at the cost of reduced equity of the homeowner. Here, it is to be noted that the reverse mortgage loans are backed by the Federal Government. In case of default by the lender, the amount is paid by the Department of Housing and Urban Development (HUD).

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  2. Reverse mortgage is a useful estate planning tool that banks and financial institutions ought to offer making available to seniors. It's a great security for them to ensure the delivery of their pensions in the amounts they thought forthcoming.

    reverse mortgage

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