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Reverse Mortgages Gain Popularity With Senior Home Owners
Much Like A Home Equity Line Of Credit, Reverse Mortgages Help Seniors
Tap The Equity In Their Properties
By The Mortgage Guy / MortgageLoanRequest.com
Many of America's seniors presently collecting
Social Security find that it is just not enough to meet their monthly
budget demands. They have worked hard and long to find themselves unable
to maintain their lifestyle and level of comfort. Many of them do, however,
own their own homes and their mortgages are fully amortized and something
of the past. The equity that has accrued over the years, and the rising
rates of property evaluation, put many of them in a great position to
start tapping that equity now.
If you, or someone you know, has come to the end of their IRA and has
no other capital to draw on, they should seriously consider a reverse
mortgage while shopping around for good interest rates and amortization
plans. The older the individual, the more they will be allowed to finance
into a lump sum disbursement or a monthly line of credit.
When looking at reverse mortgage opportunities remember that similar
to a forward mortgage, property taxes and insurance must be paid. The
mortgage holder retains ownership of the property and must continue to
maintain it. The fees associated with a reverse mortgage plan can be financed
through the mortgage itself but they must also be paid back with interest
when the loan comes to term or the property is sold. Upon the sale of
the property, or the death of the owner, the estate or the heirs must
pay the loan and all interest and costs in full. Any remaining amounts
would then be disbursed to either the owner or their heirs.
The total amount that can be borrowed is specific to many criteria, the
locale of the property, its value and what may possibly be left on an
existing mortgage. If there is an existing mortgage amount due on the
property, it is a requirement that this balance be paid in full immediately
upon being granted the loan, making the reverse mortgage the primary or
first loan.
A reverse mortgage is due to be paid when the last of the borrowers has
died or sells the property and moves out. Failure to pay property taxes
or insurance and neglecting the property can cause a reverse mortgage
to be paid in full upon the demand of the lender. However, with a reverse
mortgage, if there is still sufficient equity to cover these expenses,
they can be paid with those remaining loan funds.
Whether to accept a Fixed Rate of Interest or an Adjusting Rate of Interest
is another decision that must be made when analyzing reverse mortgage
options. How much more a borrower wants to realize on a monthly basis
will determine which rate they should choose. A lower initial rate with
an adjustable suits many seniors because it will put more cash at their
disposal, but those who worry about escalating rates need to consider
a fixed rate reverse mortgage. In the private sector, the federally-insured
Home Equity Conversion Mortgage (HECM) is the reverse mortgage of choice.
As with traditional mortgage shopping the loan cost and origination services
are very important and must be discussed in full.
Seniors should consult with a financial advisor and with their heirs,
if any, on all the ramifications of the different loan options and then
decide what is best for them.
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