4 Things You Must Know, Learn How To Get The Best Reverse Rates Available!
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These are a special type of home loan that lets a homeowner convert the equity in his/her home into cash.
This type of mortgage can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more.
Many homeowners are seeking money to pay for medical treatment, finance a home improvement, buy long-term care insurance, or just to supplement their income, many older Americans are turning to these mortgages.
They allow older consumers to convert the equity in their homes to cash while retaining home ownership.
With a regular mortgage, you make monthly payments to the lender. But with a reverse, you receive money from the lender and generally do not have to repay it for as long as you live in your home. In return, the lender holds some if not most or all of your home's equity.
Introduced in the late 1980s, reverse mortgages can help homeowners who are house-rich-but-cash-poor remain in their homes and still meet their financial obligations.
The proceeds of the loan are tax-free, there are no minimum income requirements, and for most of these mortgages the money can be used for any purpose.
But, they also tend to be more costly than other loans, and there have been cases of abuse by unscrupulous lenders.
If you're considering a reverse mortgage, it's important to understand how the loans work and what your rights and responsibilities are.
The Basics, there are several types of reverse mortgages
The federally insured Home Equity Conversion Mortgage (HECM), administered by the Department of Housing and Urban Development single-purpose mortgage, usually offered by state or local government agencies for a specific reason proprietary, offered by banks, mortgage companies, and other private lenders and backed by the companies that develop them.
To qualify for this type of mortgage, you must be at least 62 and have paid off all or most of your home mortgage.
Income is generally not a factor, and no medical tests or medical histories are required. If you seek an HECM, you also must undergo free mortgage counseling from an independent government approved housing agency. Financial institutions offering proprietary mortgages may require similar counseling or homeowner education.
The amount you can borrow depends on your age, the equity in your home, the value of our home, and the interest rate. If it's an HECM, federal law limits the maximum amount that can be paid out.
A borrower who uses an FHA-insured HECM will receive a mortgage amount based on a formula which includes a Maximum Claim Amount. In general, this means the maximum amount you can receive will be determined by factors including the age of the borrower(s), and the appraised value of the property (or the maximum FHA mortgage amount for your area, if lower).
For example, based on a loan at recent interest rates, a 65-year-old could borrow up to 26 percent of the home's value, a 75-year-old could borrow up to 39 percent, and an 85-year-old could borrow up to 56 percent. You should discuss the formula with your lender and your HUD-approved housing counselor.
You can be paid in a lump sum, in monthly advances, through a line of credit, or a combination of all three.
Most Common Features Of Reverse Mortgages.
Many offer special appeal to older adults because the loan advances, which are not taxable, generally do not affect Social Security or Medicare benefits.
Depending on the plan, this type of mortgage generally allow homeowners to retain title to their homes until they permanently move, sell their home, die, or reach the end of a pre-selected loan term.
Generally, a move is considered permanent when the homeowner has not lived in the home for 12 consecutive months. So, for example, a person could live in a nursing home or other medical facility for up to 12 months before the mortgage would be due.
However, be aware that reverse mortgage lenders:
Tend to be more costly than traditional loans because they are rising-debt loans. The interest is added to the principal loan balance each month. So, the total amount of interest owed increases significantly with time as the interest compounds.
A reverse mortgage will use up all or some of the equity in a home. That leaves fewer assets for the homeowner and his or her heirs. Lenders generally charge origination fees and closing costs; some charge servicing fees.
How much is up to the mortgage lender. Interest on this type of mortgage is not deductible on income tax returns until the loan is paid off in part or whole.
Because homeowners retain title to their home, they remain responsible for taxes, insurance, fuel, maintenance, and other housing expenses.
Reporting possible reverse mortgage fraud
If you suspect that a lender is violating the law, register your concerns with the lender or loan servicer. You also may wish to file a complaint with Your state Attorney General's office or state banking regulatory agency the Federal Trade Commission (FTC). File a complaint online at www.ftc.gov or call toll-free 1-877-FTC-HELP
You can visit the Better Business Bureau's website www.BBB.org and find reports on hundreds of Debt Elimination Companies.
The most important thing you can do to take control of your debts and get your future back on track is to do something. Take action. Starting Today, you will have the debt elimination knowledge and power in your hands to easily change your life financially!
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