Top Five Major Features of a Reverse Mortgage

Top Five Major Features of a Reverse Mortgage

Reverse mortgage loans are a category of mortgage loans available today tailored for American seniors who are aged 62 and above, and who have equity for their homes. Senior citizens typically need to have more disposable cash so that they can enjoy their sunset years and home equity is one of the most lucrative sources. The popularity of reverse mortgages has significantly increased something that is very useful because it is one of the surest ways that seniors can get insightful information. Here are some of the most vital features of a reverse mortgage loan that all seniors looking to tap this lucrative opportunity should be aware of.

1.      Maturity of reverse mortgage loan – a reverse mortgage loan matures when the last borrower sells the property in question, moves away, or dies. Moving away could be interpreted by the lenders as when the borrower moves from the property for over 12 consecutive months. In such a case, the house is foreclosed and sold to cover the interest and loan capital and all fees incurred.

2.      Interest – another important aspect is the compound interest in that because nothing is paid to the lender until the loan closes, the interest is bound to pile up to a huge amount. Interest is mostly calculated on a monthly basis based on all expenses and other factors such as the capital, service fees, and other small upfront items and stuff. You might want to request your lender to calculate the figure upfront to avoid bad surprises in future.

3.      Shareholding – this is a very critical principle. The collateral of the reverse mortgage loan comes from the real value of the property from the main mortgage insurance. It is for this reason that lenders care less about your income information or your credit score because either way they will recover their money

4.      Reverse mortgages and taxes – reverse mortgage loans basically use money which you once paid for its taxes hence when you start receiving the monthly passive income, you will not be expected to pay any taxes. Be advised though that if the whole amount is not used up within the month received, your liquid assets may rise so high to a point you will lose your eligibility to public social security. Thus, it is advisable that you confirm this pertinent issue before you sign any deal. Still on taxes issue, annuity advances may be subject to taxation.

5.      ,Affordability – be advised that reverse mortgages are very expensive owing to the upfront costs which tend to be higher than the costs of a normal mortgage. When thinking of taking a reverse mortgage loan, you should compare the costs of what you stand to gain and what you will pay and all other financial options at your disposal before making a decision.