If you are a member of the elderly population living in America, the cost of living is slowly becoming a force to contend with. As it continues to rise, the needs of many are going unmet, causing some to lose their livelihood. With so many senior citizens losing their homes to foreclosure, typically, while swimming in the midst of towering medical bills, a Reverse Mortgages can be the saving grace for countless individuals on an irregular or fixed income. Most borrowers use the proceeds for medical expenses or living expenses, but there are no restrictions on the use of Reverse Mortgage funds.
A Reverse Mortgage is a loan that is available to those who are 62 years of age or older, who either own their home outright or have a small balance remaining on their current mortgage. A Reverse Mortgage enables them to convert part of their home’s equity into valuable cash funds, providing a bridge between money invested, and money needed for basic living expenses and/or healthcare.
The term ‘Reverse Mortgage’ comes from the fact that these mortgages are the opposite of traditional mortgage payments; instead of you paying your lender each month, your lender will pay you. One of the most appealing aspects of applying for a Reverse Mortgage is that you don’t have to pay the loan back until the home has been sold or vacated. While you aren’t required to make payments on the loan, you MUST remain current on property taxes, homeowner’s insurance, and any applicable condo or association fees. In the event that the borrower becomes deceased, the bank will take its portion of the payment required, and any remaining payout will be disbursed to the deceased person’s estate or surviving heirs; you will never have to worry about leaving your loved ones to bear the burden of your mortgage debts.
Currently, there are only two types of Reverse Mortgage, the most common of which being:
Created and regulated by the U.S. Department of Housing and Urban Development, and insured by the Federal Housing Administration. While it is government regulated and insured, the loan itself is issued by a private bank. The borrower is charged an annual insurance fee, usually 1.25% of the loan balance, which protects the borrower if they are unable to make a payment. If the home sells for less than the loan balance, that insurance fund pays off the remaining balance.
Proprietary Reverse Mortgage is the less common Reverse Mortgage option. Only a small number of these exist, as they are usually taken out for higher valued homes. Once we see property values stabilize again, we may see an increased number of these privately insured “jumbo” Reverse Mortgages. The banks and mortgage companies that offer Proprietary Reverse Mortgages are not subject to the same regulations as the HECM program, but they try to maintain the same protections for their consumers.
A Reverse Mortgage provides the opportunity to give older Americans the financial security they have worked hard their entire lives to acquire. By using the money invested in their home, to stay in their home, many Americans are happy to have discovered the Reverse Mortgage option.
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