Reverse Mortgage
Taking out a reverse mortgage is a major decision, since you are putting the equity of your primary residence at stake. One of the most important things you need to do is to attend a reverse mortgage counselling seminar. This seminar is organized to enlighten the prospective borrower’s understanding about reverse mortgage. Similar to most financial transactions, reverse mortgage is hounded by myths and uneducated opinion that affect its popularity. Technically, the seminar should discuss all the options available to the borrower such as social security and housing, however, if you are bent on seeking reverse mortgage assistance, they can provide complete information.
The seminar is facilitated by knowledgeable industry experts from an independent third party who can help prospective borrowers make the decision. It can take place over the phone or as a one-on-one discussion. Aside from the usual inquiries regarding application requirements and financial rates, these experts will also provide explanation regarding the implications and nature of reverse mortgages. These include its effect on government assistance such as social security and Medicare. Tax consequences will also be thoroughly explained and its impact on the borrower’s eligibility. They will also be able to explain the effects of an existing loan to a reverse mortgage. In addition to that, they can give expert advice on how to go about these situations and effectively reap the benefits from both.
The facilitator can also explain to you the procedure of the mortgage contract dissolution. They also have considerable information about the transfer of mortgage from the deceased borrower to the heirs or estates and the participation of the borrower’s spouses. They can also further discuss the nature of a non-recourse loan and its effect on your finances and properties. These things, albeit seldom asked, do play an important role in making the decision that is why the counsellor has to volunteer these information. Some people regret their financial decisions only when they discover that some provisions in the contract are not in line with their ideals. At some point, they only realize the essence of a mortgage seminar only when they are faced with situations that seem complicated to assess.
The seminar is held not to singly encourage you to take out a reverse mortgage but to bring forth to you the arrangement’s pros and cons and present you with other options. Their aim is to educate you in managing your finances in order for you not make emotional decisions that you may later regret. They can be straightforward and advise you if a reverse mortgage would suit your needs depending on your current financial status.
The independent third party organizations who handle personal finance seminars can be searched in the roster of Home Equity Conversion Mortgage Housing counsellors or from the counselling network. The agencies permitted by the US Department of Housing and Urban Development to provide face to face and over the phone counselling are National Foundation for Credit Counselling, Money Management International, Consumer Credit Counselling Service of Atlanta, and National Council on Aging.
One of the options to increase financial support when your reach retirement age is reverse mortgage. A reverse mortgage is also known as Home Equity Conversion Mortgage (HECM) that allows you to convert the value of your house to cash or funds that can be immediately available. This is a great addition to the other retirement alternatives for homeowners who would like to expand their funds for big-ticket expenses such as tours and home improvements.
A reverse mortgage loan does not need to be entirely for expensive activities. Most borrowers use the loan to fund their daily allowance to allow themselves to live more comfortably. It is an effective supplement to social security and Medicare benefits.
Some people have the notion that the reverse mortgage would affect their government-mandated benefits such as healthcare and social security. The fact is it does not affect the status of the membership you have with social security but it has minimum impact on Medicare. The amount of loan allotment you receive in a month will have an inversely proportional effect on your Medicare benefits. If the healthcare department is able to detect that you are receiving a large amount of money each month, then they may decrease your remuneration, or they may decline your Medicare application to accommodate other members.
What you can do though, to avoid this inconvenience is to avoid keeping the proceeds of your loan in the bank because it will be misconstrued as an asset. Remember that the point in taking out a reverse mortgage is to finance expenses, and it is expected that the monthly amortization be spent in the same calendar month. If the amount of money is spent immediately, it will not affect your Medicare standing.
If you plan to take out a reverse mortgage while there is an existing mortgage in your name, the reverse mortgage must be the primary loan. If the eligible amount of your home equity is sufficient to cover the outstanding loan, then you will be able to proceed with the reverse mortgage. It is also useful to note that the difference between your outstanding existing loan and the reverse mortgage proceeds must leave you with enough funds, otherwise, it can cost you a lot more.
Because even then, your whole reverse mortgage funds would have been used up. You will no longer receive monthly payments and if the left over amount is calculated to be very little, you may find yourself in a difficult financial fix in the future. It is also possible to use the entire loan amount to pay off the existing debt and if insufficient, you may use some of your personal savings to add up to it.
Although it is possible, it is advised not to rely on reverse mortgage to pay off outstanding debts if you can find other sources of funds such as retirement accounts and investments. Reverse mortgage will be so much more effective for actual expenses rather than debt payment because of the ceiling of the amount you can borrow.
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