Have you ever heard about the term reverse mortgage? No, don’t worry, this is the reason we are here.
It is very important for you to know about a reverse mortgage so that whenever you think of taking a home loan, you can consider it as an option but only under some circumstances.
You might know about mortgages and if not you can read the blog written below.
What is a Mortgage?
A mortgage is basically a home loan that you take from a lender to buy a house or a flat and then you pay a partial amount with interest every month till the time complete amount is covered.
This gives you relief from the headache of paying the full amount at once. It lets you prepare your monthly budget so that you can adjust the loan amount in it and control your other expenses.
What is a Reverse Mortgage?
It is a loan for homeowners who are 62 years old or above. Unlike a traditional mortgage, they do not have to repay the loan taken by the lender until the owner dies or the house is sold. The loan is given in exchange for equity or its partial part. After any such demise, the lender sells the property and covers the amount that was given to the borrower.
Till the borrower lives in the house, he/she is not required to repay the loan amount and the funds collected by them can be used for their daily and medical expenses.
So now when you have understood the meaning of reverse mortgage, here are some facts that you should know about.
A reverse mortgage is not the same
A reverse mortgage also known as Home Equity Conversion Mortgage (HECM) is a very unique and different kind of loan for homeowners who are 62 years old or above. This loan helps to convert your equity or a portion of it into cash and you do not have to pay the loan back until and unless you leave the house or you fail to follow the terms and conditions accordingly.
Whenever you consider this loan as an option, make sure that you make the right decision because once if you take this loan, there is no moving back till the time you sell the house or die.
Pay for basic needs after retirement
This loan is mostly taken by elder people and is not for any kind of fun or vacation. Usually, oldies take the loan either to repay the existing loan taken or to fulfil their basic needs and continue living in their own house. This money acts as a supplement to the pension that they get after retirement and helps to make their life easy.
Less expensive than other home equity loans
The policy of getting a home loan says that you will have to pay some fees like the origination fee, third party closing charges, recording costs, servicing fees, etc. but when you opt for a reverse mortgage, you can get all these costs included in the loan itself and there is nothing that you will have to pay at the point of time.
There is only one amount that these reverse mortgage borrowers have to pay while taking the loan and that is the FHA mortgage insurance premium. This insurance is basically a guarantee that the lender will receive the expected loan payment. This insurance always ensures the amount that will become due and payable. Your heirs or you only have to pay the amount equal to the value of the house. Even if the due amount is greater, lenders cannot ask for excessive.
Get counseling before choosing a reverse mortgage
You might face difficulties in deciding about the reverse mortgage because it is very hard to tell about the time you will stay in the same house or die.
Always take suggestions and get counseling done by a good and government-approved counseling agency because only a well-trained and certified counselor can help you get the estimates and costs that you are required to pay and can tell you whether reverse mortgage suits you or not.
So these are some facts that you should know and make points out of it while you think of buying a reverse mortgage.
So now if you want to hire a company that could counsel you as well as could get you the loan, we have a suggestion. You can always opt for PierPoint Mortgage.