Look Beyond The Uses Of Reverse Mortgage Loans |
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Social Security, a pension and savings might not provide enough income to you when you retire and live in your own home. To meet all your expenses, you can use reverse
mortgage loans to borrow from the home's equity, if you are a homeowner age 62 or older. The best part is that principal and interest aren't due until the homeowner dies or moves out. As retirees' finances have been squeezed due to the long bear market, these loans have become very popular. However, they are complex and can prove to be very expensive if used only for a short time. As such, all options should be evaluated before getting reverse mortgage loans. Riding out your home's equity The first step before applying for reverse mortgage loans is to contact a reverse mortgage lender who can provide the names of approved counseling agencies in your area so that you can meet with a reverse mortgage counselor. The counselor will give you all the information about reverse mortgage loans and will also educate you about the other options available to you in view of your specific circumstances. You will also be assisted in choosing the best reverse mortgage loan that would be most suited to your requirements. If you are planning to apply for reverse mortgage loans, you should discuss this matter with your family, if they are the kind with whom you can discuss such things. Moreover, you should make sure that you get all government benefits that you are eligible for. A reverse mortgage loan can provide a very comfortable and vital financial cushion, if you can handle it with care. Types of payment Under the Federal Housing Administration's Home Equity Conversion Mortgage program (HECM), the following are the ways in which you can get the payments either in one or a combination of ways: as a lump sum payment, as a specified amount every month for a fixed period such as 10 years, as a specified amount every month until you die or permanently move out of the house, and as a line of credit. Moreover, the amount that you can borrow is dependent on your age (with couples, it depends on the youngest borrower's age), the value of the home, the interest rate and how the money is taken out. The older your age and the lower the interest rate, the more cash you can borrow. Most reverse mortgage loans are insured by FHA. An HECM line of credit grows at the same pace as the interest rate. If you borrow for only a couple of years, reverse mortgage loans will be expensive as closing costs will be high as they would include an origination fee of 2% of the home's value, plus a mortgage insurance premium of 2% of the home's value. You might also have to pay an application fee and a fee for an appraisal. HECM mortgage loans have adjustable interest rates and you can choose a rate that adjusts annually or monthly. No need to pay until death You don't have to make monthly loan payments and the loan doesn't have to be repaid until your death or until you move out of the house. If you die, the loan will be repaid from the proceeds of the sale of the house and your heirs will have up to one year to repay the loan after your death. In the meantime the loan will accrue interest. However, if the loan balance exceeds the home's fair market value, the FHA insurance fund will reimburse the difference to the lender. With reverse mortgage loans, you will not be able to get enough money to pay for long term care. However, you can use the same for buying long-term care insurance. Medicaid without incurring a loan would be the best option if you have to use a reverse mortgage for long term care. A small loan can only provide enough money for premium payments for large long term care insurance. |
