A lot of senior citizens these days are opting for a reverse mortgage at a very early age. But what they fail to understand is that what seems to be like a simple loan is a way complex scheme of drowning people in debt.
First, let’s collect enough AARP reverse mortgage information and know how it functions.
An AARP reverse mortgage is a loan in which a senior citizen keeps his home equity as collateral. The person does this in two cases- first when he needs money to pay the house bills and secondly when he must pay the debt of a loan he has taken. By opting for a reverse mortgage, he need not worry about paying any money if he continues to own the house.
But it is not as simple as it seems. Here is some AARP reverse mortgage information you must know:
Firstly, getting a reverse mortgage is difficult these days as the banks only give this loan after seeing the bank balance of the person and if you are a retired person who does not have much saving, then you might not be eligible for the loan.
You may think that there is no chance that you will ever lose your house, but the fact is that you can only own your house if you can pay the house bills and property taxes. If you are retired, then it would be almost impossible for you to pay these bills regularly and eventually you will lose your house to the bank.
Once the bank owns your home, it will sell your house, and whatever money it recovers, it will use it to pay your loans and interest charged during the mortgage period.
If your house does not sell for an amount equivalent to your loan and the interest, the government bears the loss.
In case if your home takes much more than the amount you need to pay the bank, you or your heir might get the money.
If a married couple decides to take this loan, it is advised that they are both on loan. This will ensure that if one dies, the other can continue to stay in the house, without having to worry about being evicted.
If you are thinking of opting for the AARP reverse mortgage, make sure that you take up the mandatory financial counseling by the Department of Housing and Urban Development, to get proper AARP reverse mortgage information. Make sure that you keep this AARP reverse mortgage information in mind before getting into it.
It is best that you calculate all your risks and do not jump for the reverse mortgage unless it is your only option to solve your financial crises.
A reverse mortgage is a type of loan that allows homeowners to receive payments on their house as opposed to them making payments to the lender. At first glance, this option seems too good to be true. But, before committing to it, there are some nitty-gritty details that people must consider when opting for this type of financing. So, here is some information regarding the pros and cons to consider when getting a reverse mortgage.
Advantages
Disadvantages
A reverse mortgage is a loan that allows individuals older than 62 to improve their financial well-being. They can convert part of their home equity into lump sum cash, fixed monthly payments, or line of credit, according to their preference. The money can be used to pay for medical bills, in emergencies, or to pay off a mortgage. Here’s what you should know about reverse mortgages in case you’re looking for one.
How much can you borrow?
For reverse mortgages, the loan amount can’t exceed the value of the property against which it is borrowed. Federal regulations require lenders to ensure that the loan amount doesn’t exceed the value of the house by structuring the transactions accordingly. Additionally, these regulations state that the owner/borrower is not liable to pay off the balance amount in case it exceeds the property value.
How are reverse mortgages paid for?
A reverse mortgage is payable when the borrower sells the house, relocates permanently, or dies. Unlike forward mortgages, reverse mortgages don’t need the borrower to make any monthly payments. They are only liable to pay interest on the money received, which is rolled back into the loan balance. While the owner gets to keep the title to the home, their home equity reduces over the loan tenure.
Who can take a reverse mortgage?
This type of loan is ideal for seniors and retirees whose net worth comes mostly from the value of their home. Seniors who don’t qualify for a home equity loan or can’t refinance due to limited cash flow or poor credit can opt for reverse mortgages. Home Equity Conversion Mortgage (HECM) for purchase is a reverse mortgage that allows seniors to buy another property. That said, it is complex, and you should study the risk factors before getting one.
What are the risks associated with reverse mortgages?
Reverse mortgage scams are not unheard of. Unreputable vendors could offer to help seniors secure reverse mortgages by undertaking house repairs. They don’t provide quality results and get away with the homeowner’s money instead. For spouses living together in a home with only one spouse named as a borrower on a reverse mortgage, the other spouse can lose the home if the borrowing spouse dies first. Besides, reverse mortgage lenders charge fees and closing costs and may also charge mortgage insurance premiums for federally-insured HECMs.