If you have been working hard all of your life, don't you think you get to reap the rewards now? If you have invested into your property, specifically your home, because of that hard work you can use it now to your advantage by making it pay you back. How? Through reverse mortgages.
But what are reverse mortgages anyway?
Reverse mortgages are a financial tool that senior homeowners, specifically 62 years old and up, can use to access and convert some portion of their home equity into a retirement income tax-free.
This tool is federally insured so it does not only provide supplemental retirement income flow while simply staying at home and living independently but also the financial security - all these without making mortgage payments per month, giving up title or selling their homes.
You might probably wonder the tool is called reverse mortgage. The reason is unlike another tool which is the forward mortgage, in which you are doing the payments, in reverse mortgage you are the one who is being paid. For so long as you are living in your property, you don't make any reverse mortgage payments.
And when the due comes, you won't have anything more than the total appraised value of your home to owe the bank. And what's more? The bank does not get any remaining equity in your home as it remains yours to enjoy.
How reverse mortgages are federally safeguarded?
The government has set some ways to protect the interest of the senior citizens and shield them from any lending predators. Included is the policy mandating that there must be third-party counseling sessions before any processing of the application occurs. It is also a protection policy that mandates any application must not be processed unless it is taken personally by the senior citizen. The objective is to protect them from any mail or phone scams.
What are the benefits?
With reverse mortgages, you are set to take advantage of financial security so you stay in your home and feel more positive than ever about your future now that you are retired. You also have no limitations when it comes to your expenditures and that is the benefit of receiving supplemental cash flow to your retirement income.
Additionally, you have peace of mind because you are protected and fully insured. You don't have to worry that after the reverse mortgage loan you will be paying more than your home's total appraised value.
The money received from reverse mortgage is not taken as your income; therefore, it is also under tax-free financial benefits. And for you to qualify, you don't have to have income. You also do not make monthly payments instead you get additional monthly cash flow. It is through reverse mortgage too where you can start paying off any existing mortgage or eliminating debts.
And what are the other benefits?
Of course, with the extra cash you get from reverse mortgages, you can spend however you like, such as making home improvements or repairs, paying for the college education of your grandchildren, traveling for your own enjoyment or visiting relatives and friends or simply vacationing, making unexpected large expenses. Or simply, living a lifestyle more comfortably than what you prepared for.
Are you ready to take out a reverse mortgage? Well if you are indeed prepared to cash in your home’s equity, here are the things you need to know and accomplish.
Do your reverse mortgage homework and research as thoroughly as possible. Though you may be mentally prepared to convert your home’s property value, you will never know if there are other things you have not yet touched down. Look for a list of reverse mortgage lenders and note down their rates and conditions so you can compare these agencies. Reverse mortgage kits and guidelines can also be found online for free. When you have done enough reading and researching, seek an independent third party consultation from the HUD list. They conduct the private counselling in person or over the phone. This is especially useful is you have encountered terms which you do not quite understand. Additionally, if you have heard myths about reverse mortgage, they can debunk it for you.
Once all your doubts are settled, fill out an application form from your preferred lender and choose your mode of reverse mortgage payment. You can receive payment through a lump sum, term, modified term, tenure and modified tenure. Your previous session with the financial counsellor would have already provided you with the necessary payment options information.
Your chosen lender will process your application and this involves a full investigation and appraisal of your home. They will be able to determine the value of your property based on its location and status. Afterwards, the lender will finalize the loan parameters and submit the full package for underwriting.
When your loan has been successfully underwritten and approved, they will make a computation of the initial interest rates and closing expenses. You will then be presented with the loan contract that states the final figures and closing papers. Once the contract has been closed, you have three business days to cancel the loan. Should you decide to do so, you must cancel in writing otherwise, the disbursement will begin to process on the fourth business day.
If you have existing loans placed on the property, the lender will arrange to cover the payments necessary. It is imperative that you are only obligated to the reverse mortgage while it is in effect. That is why before the loan money is released to you the existing debts will have to be paid. The rest of the funds will form part of your line of credit or monthly amortization no matter how big or small the excess is. There are instances wherein the existing loan repayments have consumed the full mortgage fund. When this happens, the reverse mortgage remains in effect but no other payments will be made to you.
When the existing debts have been repaid, you reverse mortgage amortization will commence and you receive the payment according to your preferred payment option. You reverse mortgage will expire when either of the three has transpired: the borrower dies, the home is sold, or it ceases to be the primary residence.
This website uses cookies that are necessary to its functioning and required to achieve the purposes illustrated in the privacy policy. By accepting this OR scrolling this page OR continuing to browse, you agree to our Privacy Policy