The Facts About Reverse Mortgages
Reverse Mortgages Are Loans Based On Equity In A Home
Reverse mortgages are not based on all of the equity you have accumulated in your home. The FHA has specific guidelines and calculations that determine the maximum loan amount which is based primarily on the age of the youngest borrower, value of your home based on a certified FHA Appraiser, and current interest rates.
The value of the home must also be sufficient to provide the borrower(s) with the amount needed to meet the need but to also cover all costs associated with the loan, including mortgage insurance, lender fees which include origination, appraisal, title, servicing, and other fees.
There Are A Variety of Distribution Options for Reverse Mortgages
There are 5 different reverse mortgage options:
- Fixed equal monthly payments without a defined term;
- Fixed term with equal monthly payments which stop at the conclusion of the term;
- Flexible line of credit which enables the Borrower to access funds which needed up to a maximum draw or loan amount;
- Combo line of credit which also includes Fixed monthly payment as along as you live in the home; and
- Combo line of credit which also includes a Fixed Monthly Payment for a defined term.
Can I Lose My Home With A Reverse Mortgage?
Though there is some protection for homeowners, Borrower(s) must continue to satisfy key responsibilities and obligations such as:
- Paying for utilities;
- Homeowners and flood insurance; and
- Real-estate taxes.
Though the majority of lenders monitor the loan to make sure the obligations are met, it is the responsibilities of the Borrower to make these payments. If a Borrower does not keep up on these obligations, the home can be foreclosed. It is important that Borrowers plan wisely to ensure they don’t fall behind and lose their home because for poor financial planning and budgeting.
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