Facts to consider with the Reverse Mortgage program and whether or not this is the right decision for you. There are definitely many advantages to the reverse mortgage program, which is also called the Home Equity Conversion Mortgage (HECM) loan. Borrowers have the ability to take out a loan on their property without having to make monthly mortgage payments. And the mortgage typically does not have to be repaid to the lender until the borrower moves out of the house permanently or passes away.The borrower has many different payout options available to them, such as a lump sum payout, which all money will be paid to them at once. Another option is the line of credit, which the borrower may use to draw money at anytime they wish. The credit line available grows as the house appreciates over time, which means the borrower has access to more money if they need it. Lastly, there is a monthly payout option, which is a fixed monthly payment made to the borrower from the lender or bank. The borrower has the option of a lifetime guarantee monthly payout, as long as they live in the house, or a fixed monthly payout for a set amount of time.
Of course, there are disadvantages to the reverse mortgage program that needs to be spelled out. You need to be well informed with this type of major financial decision.
Spouses
All borrowers that are going to be on the reverse mortgage loan and title to the home will need to be at least the age of 62 or older. Some borrowers and their spouses or significant others have opted to not add the younger spouse to be able to qualify for more money because there may be a bigger gap in age or the younger spouse is not old enough to qualify for a reverse mortgage. This is a major risk because if the older borrower were to pass away suddenly, the younger spouse may be left out in the cold because the reverse mortgage becomes due within 6 months of the borrowers passing. The younger spouse will either have to qualify for a reverse mortgage on their own, if they are now old enough, or qualify for a traditional mortgage. If they cannot do either of those then the younger spouse will need to pay off the loan by either selling the property or paying it off with retirement savings. To be more conservative both spouses or significant others should be on the loan, even if that means waiting to qualify because of age.
Foreclosure
The borrower will never have a required monthly mortgage payment on their home as long as the borrower keeps up with their end of the deal. The borrower must keep making all property tax and homeowners insurance payments on time. Also, the borrower must maintain and upkeep the property (i.e roof repair, a/c repair), essentially keep the home in livable condition. Lastly, the borrower must live in the property as their primary residence, if they move out for more than 6 months, then it would no longer be considered their primary home. The loan becomes due in full if they do not live up to these agreements and if they borrower cannot come up with the money to pay off the reverse mortgage, by means of a traditional loan or cash, then the foreclosure proceedings could start.
There are many advantages to having a reverse mortgage, but as with any financial decision, there comes some disadvantages.
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Facts to Consider with the Reverse Mortgage Program
![Facts to Consider with the Reverse Mortgage Program]()
Reviewed by Merlyn Rosell
Published :
Rating : 4.5
Published :
Rating : 4.5