Reverse mortgages are wonderful products that are available to seniors. These loans are available for homeowners who are 62 or older. They are neither handouts or scams. To the contrary, they are financial vehicles that allow seniors to tap into their hard-earned equity to meet retirement needs.
Benefit From the Equity That is Already Earned
The benefit from a reverse mortgage is calculated by looking at the age of the borrower and the amount of equity in the home. A reverse mortgage works by allowing seniors to benefit from years of equity appreciation and paying off of their existing mortgages. Often seniors will use the proceeds from the reverse mortgage to repay their existing mortgage so that their is no monthly repayment obligation. Reverse mortgages can drastically improve the borrower’s monthly budget this way.
Creating Liquidity During Retirement
A borrower can choose to receive the reverse mortgage proceeds almost any way they want. The can receive a lump sum distribution, a fixed monthly payment or open a line of credit. Basically, the borrower has full control over how and when they receive their money. The reverse mortgage is often used similar to a savings account where the borrower can tap into the proceeds whenever they choose. In fact, seniors can use these proceeds for almost anything they desire.
How a Reverse Mortgage Works
When a borrower decides to take out a reverse mortgage, the first step is usually to take an appraisal of the home to determine the level of the borrower’s equity. During the entirety of the loan, the borrower continues to own the property. In addition, the borrower is required to keep the taxes and homeowner’s insurance on the property current. As long as these requirements are met and the borrower continues to maintain the home as their primary residence, the loan will not become due.
How to Repay the Loan
Borrowers do not need to repay reverse mortgages as long as they continue to live in their home. Once the last surviving borrower dies, the loan becomes due. Also, if all of the borrowers live outside the home for more than twelve months, the loan will become due. Once the loan comes due, the owners of the property must repay the loan. This can be done with cash, by refinancing the loan or by selling the home. One of the benefits of a reverse mortgage is that it is totally non-recourse. This means that the borrowers and their heirs can never owe more than the home is worth.
Learn more about reverse mortgages. Stop by Tim Begert’s site where you can find out all about HECMS and what they can do for you.
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