But what is reverse mortgage? What is the benefit, which a senior can get, if he or she will take this loan? What is reverse mortgage for the heirs of the senior? And what does the loan mean for the financial status of a borrower?
The key idea of these loans is to reveal cash money from the home equity, so the target group is the seniors, which own their own homes, where they have equity left and which are their permanent homes. The loan is a long term commitment and nothing will be paid back untill the loan will be closed. If the senior has traditional mortgage loan, he has to pay away that with the reverse loan.
1. A Home Owner Senior Will Qualify.
The only source of money is the home equity, which is also the only guarantee for the loan. This means, that the borrower can borrow a certain amount from the equity, which is his own capital. The rest is usually a loan. There is no income or credit score information needed.
The loan capital and all the costs will be paid back, when the loan will be closed, which happens when a senior will move away, sell the home or die. Then the home will be sold and the selling price is used for back payments. If it does not cover the whole amount, the obligatory mortgage insurance will pay the difference.
2. The Mortgage Refinancing.
Only a few seniors know, that they can use the reverse loan to refinance the original reverse loan. The home price increases makes this possible, because the senior will continue as an owner after he has taken the reverse loan. For instance, if 10 years has passed from the first reverse loan, the home values have risen significantly and made space for the new loan. He just pays away the old one and takes a new, bigger loan.
3. The Payments Are Tax Free.
This is clear, because a senior has paid taxes from the salary with which he has paid the usual mortgage of which a part is now the home equity. The paid interests can be reduced in the taxation once they have been paid during the closing process.
4. Max 3 Borrowers Are Accepted.
A senior can take the loan alone, with his spouse or with other two or three seniors, but all must be the owners of the home and qualified for the reverse loan, i.e. at least 62 years old.
5. The Compulsory Counseling.
Unfortunately the reverse loan market has a lot of fraud companies. To prevent the damages the federal government has ruled, that every senior has to meet the counselor, before he can sign the agreement. This meeting, despite of the fact that it is compulsory, is also very useful one. The counselor can advice about all financial options and give names of the legal and reputable lenders.
