Most of the elderly people, or retired persons have been undergoing a severe financial strain due to lack of more avenues for a regular stream of income to live their life peacefully. The reality is that while their expenses are on the increase the incomes are on the other way. Even for people who have some knowledge of Reverse Mortgage are seeking the help of financial experts for proper guidance. This article provides you with details on Reverse Mortgage so that you can even help guiding those who are seeking a financial support.
A Reverse Mortgage is a special type of loan that gives a homeowner the ability to convert a portion of the equity in their home into cash. The funds aren?t taxable income, and they generally don?t affect the homeowner?s eligibility for Social Security or Medicare programs. An exception is the federal Supplemental Security Income program: beneficiaries must keep their liquid assets under a certain limit to remain eligible. A reverse mortgage customer retains the title to the home and keeps the right to any appreciation in home value when the loan is paid in full. The loan remains in force until the last titleholder leaves the home, sells the property, or passes away. The borrower can?t be compelled to sell or move by the lender. Unlike a traditional second mortgage or home equity loan, there are no required monthly payments. As a result, a reverse mortgage doesn?t put additional pressure on seniors? already stretched budgets.
Title to the home and any appreciation in value remains the seniors property when the loan is paid off. The loan remains in affect until the last titleholder dies or permanently leaves or sells the home. The borrower can not be forced to move or sell the property. The loan can be paid off at any time. One of the benefits of a Reverse Mortgage over traditional loans is no monthly payment requirement. A Reverse Mortgage can free a senior of monthly mortgage payments and ease some of the money worries day to day living causes.The FHA insures and guarantees most Reverse Mortgages today so they are subject to FHA lending limits. Proprietary products have been developed to help homeowners in excess of these lending limits.
There are a few qualifications for a reverse mortgage. Every title holder must own a home with some equity, and be 62 or older; there aren?t any income or credit filters. Current mortgages or liens must be paid off, but this is often accomplished with the proceeds from the reverse mortgage. The homeowner is required to remain current on insurance and property taxes, but these can also be paid with the reverse mortgage proceeds.
A reverse mortgage borrower has no restrictions on how the monies can be used. Here are common uses for these funds:
- Mortgage loans and credit cards
- Remodeling projects or other home improvements
- General living expenses
- Vacations
- Health care
- College tuition
- Education
- To fund hobbies
- To defray the rising cost of property taxes
The proceeds available from a Reverse Mortgage vary depending on FHA lending limit?s and other factors like borrower?s age, value of the home, and interest rates. Typically the older the borrow, the higher proceeds available. Proceeds from the loan can be paid in a lump sum, in monthly payments, or extended as a line of credit available when needed.
However the borrower has to meet certain expenses to get this reverse mortgage money such as origination fee, closing costs, insurance in case of HECM etc. Before obtaining a reverse mortgage the borrower need to sit with a Reverse Mortgage counselor to submit details of his financial situation and get a training to understand the Reverse Mortgage transactions.
Graham McKenzie is the content coordinator for a leading South African leading Home loans and Bond Origination portal which provides access to Standard Bank Home loans.