Reverse Mortgages – 4 Things You Need To Know
Here is the scoop on a new, hot-commodity especially for those trying to pull equity out of their home, or adding to their income on a monthly basis (really beneficial for those in retirement, needing more income and have equity/value in their home). Also in many ways it is better than a line of credit or 2nd loan against your home. This article is from the Property Source Network:
Many older Americans are turning to reverse mortgages to supplement their income. A reverse mortgage allows the homeowner to convert part of their home’s equity into cash without having to move. If you’re house rich and cash poor, this is an option to explore and the Department of Housing and Urban Development (HUD) has the answers.
It works like this. Instead of making monthly payments to your lender, the lender makes payments back to you, based on how much equity you have in your home. You must be at least 62 and use the home as your primary residence in order to quality. The proceeds are generally tax free and have little or no income restrictions.
There are substantial differences between this and an equity loan. First, an equity loan requires that you have sufficient income verses debt ratio to quality. And you’re required to make monthly mortgage payments. Income doesn’t matter with a reverse mortgage, although you are still required to pay real estate taxes, utilities and insurance. As long as you live in the home and keep taxes and insurance current, you cannot be evicted. That’s not true with an equity loan.
If this sounds appealing to you there are things you must know.
1) The amount you can borrow with this plan depends on your age and the appraised value of your home or FHA’s mortgage limits, whichever is less.
2) At the time of sale or if you are no longer using your home as a primary residence, you or your estate will repay the cash you received from the reverse mortgage plus any interest and other applicable fees. The remaining equity, if any, belongs to you and your heirs. This debt is not passed along to the estate or heirs.
3) If you outlive the loan, the lender cannot take the home away. And you can never owe more than the value of the property.
4) Payments can be made in several ways. (1) Equal monthly installments can be paid for a fixed amount of time. (2) A line of credit can allow you, the homeowner, to draw at times and in amounts of your choosing until the credit is exhausted. (3) You can schedule a combination as agreed upon by you and the lender.
HUD does not recommend that you use an outside service to set up a reverse mortgage. HUD approved housing counseling agencies are available free. All you need to do is contact them for a list of approved lenders.
Information and Copyright Property Source Network 2007
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