Reverse Mortgage
You have probably heard it a lot of times before, that you must thoroughly understand reverse mortgage before taking out one. Supposing you already have complete understanding and appreciation of this mortgage arrangement and are ready to sign up, here are the qualifications that you need to remember.
You must be 62 years or older in order for you to benefit from the reverse mortgage facility. This arrangement is primarily set-up for the senior citizens in their retirement. It is designed specifically for the senior consumers to be able to make use of their home equity in advance. Most retirees do not find the need to keep the home especially when the rest of the family have gone on to build their own houses. Some would prefer to spend their years in a senior facility where they can continue the social interaction with the community. Reverse mortgage allows them to keep open the possibility of selling the property while they capitalize the financial aspect of their house.
The property must be your primary residence and in your ownership. The registration and the land titles must indicate your full ownership of the house. This must also be the residence that you continuously occupy and not simply a vacation house. Primary residence holds a higher assessment in the reverse mortgage appraisal. The point is for you to reap the benefits of your primary home equity while you reside in it. It is giving you the privilege to be doubly rewarded by your efforts. A secondary home will not give you that much of morale boost as with a primary home.
As mentioned earlier, you must have understood the consequences and conditions of a reverse mortgage; therefore, you must have attended and completed the counselling program before taking up the contract. The counsellors will answer all your queries and enlighten you about the myths surrounding reverse mortgage.
The home to be mortgaged must meet Federal Housing Authority standards and be well maintained. Just because it is mortgaged does not mean you can set repair issues aside and let it depreciate. Remember that your home will be eventually sold and the proceeds will be used to cover your mortgage payments. You must take extra care in ensuring that your abode will command a high price in the property market. Otherwise, you will suffer the consequences of an undervalued house and receive less than what it is really worth.
You must see to it that all the necessary real estate taxes and insurance have been settled. This also affects the selling point of your house. These days property buyers are smart and will pay with good money if they know that the house is in great shape with complete and updated documents.
If you are indeed ready to take out a reverse mortgage, then you can look forward to a much improved senior life with better financial flexibility. It does not work for everyone but it did great for most of reverse mortgage borrowers and it could work well for you too.
Reverse mortgages give older homeowners the opportunity to have an income even if they are already retired. The good thing about this approach is that unlike the traditional loans, they do not need to shed out cash every time and again just to cover what they have borrowed. Instead, they are the ones who will be receiving cash, in exchange of the value of their homes.
This idea is certainly exciting for the seniors who want to enjoy their retirement years to the fullest. However, they must be aware first of the options on how they will receive their payments. Without fully understanding these methods, the money might not be budgeted properly once it is received.
The following are ways on how reverse mortgage borrowers can receive their funds. These options are flexible enough to meet the needs of the borrowers. They just have to weigh their needs against the length of time they will be collecting their money.
Lump Sum Payment
Seniors can take the balance due to them in a single lump sum payment. This can be beneficial if the need for a large amount of money immediately arises, but you have to know yourself if you are disciplined enough to budget and allocate the funds effectively.
Term Payment
A term payment allows you to receive a fixed amount of money every month for a set period of time. You can have the cash deposited into your bank account every month for a period of like a year or two, depending on what you have agreed upon with the lender.
The only downside on this type of payment is when your spending habit starts to become irregular and you’ll need more cash in addition to what you’re receiving monthly. When this happens, it is time to switch to a more convenient payment plan.
Tenure Payment
A tenure payment is almost similar to a term payment, except that there’s no limit as to when the loan would end. The only instance when it will be put to a halt is when the person dies or vacates his home. He will continue receiving fixed monthly payments as long as he lives in his home.
The only difference, however, is that the monthly stipend is smaller as compared to a term payment. This is attributed to the fact that there’s no limit to the period of time you’ll be receiving your payments.
Line of Credit
Seniors could also set up a line of credit where they will be given a free hand on how they will access their funds. They can get different amounts in different times, depending on their needs. Also, the value of the home appreciates if the balance is unused.
Just like in a lump sum payment, there’s also a possibility that your credit line will become exhausted because there’s no external control that manages the money. Prioritize your spending so as not to request for additional funds.
Term and tenure payments can also be modified by setting up a line of credit. Choosing a modified payment scheme gives the senior two ways in getting his funds. The monthly payments that will be received will be smaller because a portion has already been allotted to the line of credit. This principle applies to all types of reverse mortgages.
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