Key Questions to Ask About Reverse Mortgages
Have questions about a reverse mortgage? This article addresses key questions to that are often asked about reverse mortgages. Our company, Shop Reverse Mortgages, is adamant about customer service and satisfaction because we view each as paramount to our long-term success. It is important that you understand the reverse mortgage process before initiating into it.
What is a reverse mortgage loan?
A reverse mortgage is an accessible financial instrument for seniors age 62-years or older who own a majority or all of the equity in their home. Basically, how a reverse mortgage works is that it allows the exchange of money for the equity in the person’s home. A reverse mortgage allows seniors to access the equity in their home until they (1) decide to sell the home; (2) move to a different location for more than 12 months; or, (3) when they become deceased. At any of the three points, the person is required to repay the loan, which includes the amount originally disbursed plus the interest and additional charges and fees.
What is the difference between a traditional mortgage and a reverse mortgage?
Traditional mortgages are usually loans provided from a lender to a borrow against home equity for expenses and bills, or to purchase a piece of property. Since the leader provides the loan, which typically extends over the course of 15 to 30 years, they will own the majority of the equity in the home at the onset. After years of consistent monthly payments, the borrower will soon take possession of the property. At that point, the lender owns nothing and the borrower owns the property.
On the other hand, a reverse mortgage is a financial product where instead of the borrow paying the lender, the lender pays the borrower. The payments can be (1) allocated as a line of credit, where the borrower can choose to use the proceeds at any time they deem fit, which is advantageous because interest is limited; (2) a single disbursement option that is with a loan rate that is fixed; (3) a term option, which is characterized by a monthly cash advance that is disbursed over a specific period of time; (4) a tenure option that provides a fixed cash infusion while living in the property; and, (5) a combination of the previous options. The money received is usually tax-free.
Are there fees added to a reverse mortgage loan? If so what are they?
While fees differ from lender to lender, generally, the reverse mortgage lender will charge fees relating to servicing over the life of the mortgage, which are charged each month; an origination and closing costs fees, which are charged once; reverse mortgage insurance premium that are for federally insured HECMs, which is charged a single time at the closing and a percent of the outstanding loan balance each month, are also known to be charged as well.
Does the tile of the home transfer to the lender with a reverse mortgage?
A common misconception is that the lender takes the title of the home; however, this is not the case. You will still own your home. In addition, the responsibility still bears with you in paying for repairs, property taxes, and insurance. It is imperative that these responsibilities are maintain otherwise you run the risk of having your property being repossessed.
Having the Right to Cancel
The right of rescission allows one to cancel a reverse mortgage within three days of closing the deal without a penalty. Within 20 days of cancelation, the lender is required to return any and all money paid with the purpose of financing. It is recommended that when you notify the lender in writing that you also request a receipt to use as documentation — in addition to all correspondence and enclosures.
What happens if the loan, when due, exceeds the equity built in my home?
In a majority of cases, selling the home is the method used to repay the reverse mortgage loan. Additionally, most lenders absorb the difference if the home isn’t enough to pay for the reverse mortgage — with that in mind, one should not abuse that privilege. Insurance comes to play in this situation if it is backed by the government. In that case, the government will absorb the difference.
What happens if the loan, when due, is less than the equity built in my home?
Cheers! This means you managed your money well and you keep the proceeds from the deal. It is important to ask the lender to clarify this to ensure there are no surprises.
Having read this article, if you still find that you have additional questions, feel free to reach out to one of our specialists. You can learn more by reaching out to a specialists during our business hours, which are on Monday to Friday, 9 a.m. to 8 p.m. EST and on Saturday to Sunday, 12 p.m. to 3 p.m. The best number to call is (888) 547-8308. When speaking with a specialist from our company, it is important to provide the uses of the capital, your lifestyle, and other information that aids in an assessment of you. This will help our specialists design a deal that has all of your best interests in mind. Alternatively, for more information, visit our Learning Center that provides a wealth of information related to the most important topics related to reverse mortgages.