What is it?
Well, about reverse mortgages are loans like regular ones that allow senior citizens to borrow loans against their homes as security for the amount. With these the ownership remains intact, the title of a home would be restricted to its owner. One major difference with these loans is unlike conventional loans, here the borrower is not expected to make payments at fixed intervals, it’s only done when the borrower does live in the same house anymore.
As far as these loans are concerned, the loan amount that one has taken does not increase, for the interest and fees are attached to the loan balance each month. Therefore, the loan balance goes up while the home equity comes down.
- One common notion as far as these loans are concerned is that the ownership of one’s home would not be theirs any longer and it would henceforth be in the lender’s name. That’s incorrect, the ownership continues to be confined to the owner of the house provided they have remained firm with the terms and conditions and not violated them.
- Another welcome change with these is, here the borrower is paid as long as they live in the house, which is unlike regular loans where the borrower is made to pay a fixed amount at regular intervals. Here, the loan is paid only when the house is sold, however, the borrower has to be regular with paying property taxes, homeowner’s insurance, etc.
- Reverse mortgages are covered by the federal government, which guarantees complete security. In case the amount borrowed crosses the value of the house when sold, it would be insured (difference) by the government.
Timing is an important factor as far as these are concerned for one may have to shift out to another place within a brief amount of time of taking the loan. It’s not at all a sensible thing to do if that is like to be the plan ahead, then they would have to pay the loan as they relocate. This entire idea works best for people(homeowners) with long-term plans.
Though these loans have their share of pluses, on the pro side one could feel burdened with being regular with the terms and conditions like paying property taxes, homeowner’s insurance, and other obligations. One may even be asked to repay the amount loaned in case they have delayed in meeting the obligations.
A great source of help for senior citizens however they need to be very careful about considering the option for it has its share of commitments too.Continue Reading