10 Important Basic Facts About Reverse Mortgage Home Equity Loans | Part 1
Wondering what is a reverse mortgage is? Wondering is there any effect it has on your home’s equity is a viable financial option for you? I will be letting you know and understand the 10 facts about reverse mortgages in general. Do remember to understand the process, the qualifications and most importantly, be aware of the conditions it needs.
1) What is a Reverse Mortgage?
A reverse mortgage is a loan where a bank or lending company pays money to purchase equity in a home. In a traditional mortgage, a borrower is allowed to take occupancy of the home he/she owned while slowly purchasing its equity from a lending company concurrently but reverse mortgage is just the opposite. In Reverse Mortgage, the mortgage company purchases a percentage of equity in your home but allowing you to remain in your home which the bank will collect the loan with interest at a time later.
2) What is the minimum income requirements needed?
Frankly speaking, it can be no minimum set. It is very much the opposite of a traditional loan where there are usually no income guidelines or minimum requirements for a reverse mortgage. Why is this happening you might ask? Well, the reason is actually very simple; the mortgage is not intended to be paid in installments. A reverse mortgage is mainly designed for borrowers who are of or nearing retirement age where they already have a sum of saving which allows them to repay their debt at any time. Here is the tricky part, instead of payments, the reverse mortgage is intended to be paid off when none of the co-owners continue to use the home as their primary residence. The sale of the property, not the borrower’s income, will be the source of repayment.
3) What are the payment options available?
There are a few ways you can go about doing it. First, you may choose to receive the total of your reverse mortgage in the form of installments or lump-sum payout or a personal credit line. You may also have a mixture of the different kinds of payment mentioned earlier to be paid to you.
4) How is the Mortgage Repaid?
Most of the reverse mortgages require no repayment to the lenders while you are alive and living in the home you owned and also always maintain your level of ownership or co-ownership of the house or land property of yours. Reverse mortgage repayment comes into play only when you or any co-owner no longer reside in the home then you are obligated to repay, always remember this, period. This maybe also in the form of illness, death or sale of the home, or any other reason that would strip the borrower of titled ownership, where this kind of circumstances you cannot control.
5) Reverse Mortgage if There is a Lean on the Title?
The answer is a definitely, Yes! Your reverse mortgage will need to be substantial enough to repay the existing mortgages you owned or leans on the title in full before extending payment or personal credit to you. For example, if a borrower owes $50,000 on a forward mortgage and would like to use the same property he owned to acquire a $50,000 line of credit or loan, than the reserve mortgage would have to be at least $100,000. Hope I get this point across to you.
P.S: I will be posting the second part of this Reverse Mortgage Home Equity Loans series soon, keep a lookout for it!
Filed Under Reverse Mortgage Home Equity Loans Know-How |
Tagged With Reverse Mortgage Home Equity Loans
Comments
Leave a Reply