What is a reverse mortgage and what benefits it can give to the typical American senior, who fights with his or her small monthly incomes and with the increasing medical bills?
How does a reverse mortgage work and what are the qualifications?
1. The Taxes And Medicare.
The money received from the reverse loan is not taxable and does not generally influence on the Medicare or other social security benefits. However, if a senior receives payments from the reverse program and does not use the whole sum during the same month, the amount of the liquid assets may raise too high and there is a danger, that she or he will lose the eligibility to the public benefits.
2. What Is A Reverse Mortgage Proceed?
The guarantee for the reverse loan is the equity of the home, where the lender or lenders live permanently. The loan sum is calculated using 3 factors, which are the appraised value of the home, the age of the youngest borrower and the interest rate level. The older the youngest borrower is, the higher the appraised value of the home and the lower the interest rates, the more he, she or they can get. The legal maximum is $ 625.000.
3. How The Payments Come?
In this loan type the borrower will decide, how the lender will pay to him. The need of the money will usually dictate the schedule. The alternatives are the monthly payments, the lump sum, the credit line or the combination of all or some of these.
4. The Duties Of The Owners.
The borrower, or borrowers, will remain the owners with all the duties. The owner has to pay the property taxes, the insurances and to keep the property in a good shape. If either taxes or insurances elapse, this can lead to a default on the reverse mortgage.
5. What Happens At Closing?
The loan will be closed, when the last borrower will move away, sell the home or die. This is the time, when the home will be sold and a part of the selling price will be used to pay back the loan capital, the interests and all the costs. The rest goes to the owner or to the heirs.
If it happens, that the selling price does not cover the whole debt, then the obligatory mortgage insurance is used. It is important to notice, that the borrower will never use his other assets to pay the reverse loan, nor can he owe more than the value of the home.
The costs of this loan type are higher than those of the usual mortgage. However, this is a special senior loan and offers in some cases the only opportunity for a senior to get some extra incomes. Compared to the benefits it is not costly, but everybody have to judge this by himself.