How to Know if a Reverse Mortgage is Right for You – Part 2
In our last post we took a look at what exactly were reverse mortgages and their different types. Then we took an overview of how the different points that characterize them.
Now, let’s keep looking at what are reverse mortgages and at their distinctive features:
. The funds from the personal loans of reverse mortgages are not subject to taxes.
. Receiving these funds do not affect at all any of the benefits you can get from your Social Security or Medicare.
. Some of the rates for reverse mortgages are fixed, while others are variable depending on the market interest rate.
. Most importantly, you retain the title of your home.
. No monthly payments are required. In fact, you are paid monthly.
. The personal loan is repaid when the last surviving borrower dies, when they sell the home or when they no longer live in it or use as their principal residence.
. In the case of HECM personal loans, these allow a borrower to even be placed in a nursing home for up to an entire consecutive year before the personal loan terms are due.
. While the reverse mortgage lasts, you will still be responsible for all your taxes, insurance and maintenance.
How Payments are Received
With the exception of Single Purpose Reverse Mortgages, you can choose the way you receive your funds from other personal loans from among these:
. Monthly cash advances for fixed amounts that will last for a set period of time.
. Fixed cash advances every month during the entire time you reside at your home.
. You can use your payments just as if you were using a line of credit.
. You can also choose to receive your money as a combination of monthly payments and a credit line if you wish so.
Regular Fees Associated with Reverse Mortgages
. Origination, appraisal and closing fees.
. The mortgage’s insurance premium an dither possible that might apply during the duration of the loan.
. One of the main drawbacks of a reverse mortgage is that the amount you owe will increase over time.
. Interest is charged for reverse mortgages on their outstanding balance are also added to the overall amount you owe every month.
. Your total debt amount will increase, since money is paid to you and the interest on that loan accrues.
. If for some reason you fail to pay your taxes, your insurance premiums or to maintain proper condition of home, your personal loan might become due and therefore, payable.
The Payment is Due When:
. The last surviving borrower dies.
. You move away from your home.
. You sell the home you live in.
Another positive aspect of personal loans from reverse mortgages is that no matter how large the amount of the personal loan balance, you will never have to pay anything more than just the appraised value.
How to Cancel Your Reverse Mortgage
One your personal loan closes, you have a window of three days that you can use to cancel it. Each mortgage lender will of course have different processes for cancelation, so it is advised to contact each separately in order to obtain the necessary information. But as a guideline, notifying the lender in writing, then sending the letter by certified mail and ask for a return receipt will apply in most cases.
So, Are Reverse Mortgages For You?
While there will definitely be times when acquiring a personal loan via a reverse mortgage might make sense for certain homeowners, there are other who don’t like it even if there are still a lot of people who still consider this option as a way to free up more money for their retirement years.
So please consider things carefully and be sure to ask for all the facts from your different financial institutions before you make your choice.