The Truth About A Reverse Mortgage
Even though the concept of the reverse mortgage has been around since the original banks thought it up, it was rarely used. Today, many professionals in the real estate and mortgage markets don’t even know what they are.
However, when the economy took a severe hit, the housing market collapsed and the reverse mortgage became popular once again – probably more popular than ever before. When people started talking about it again, there were still many misconceptions as to the purpose and who would qualify. Many homeowners are saddened to learn that the minimum age for qualifying is 62 because this was originally started to help elderly on fixed incomes.
A reverse mortgage is exactly what it sounds like. Instead of you paying the bank each month, the bank pays you. You have a choice as to whether you want one lump sum, or if you’d prefer to have installment payments.
Your home will need to be appraised. For anyone who purchased their home years and years ago, in today’s market that might not be a problem; the house has increased in value and is worth significantly more than when you purchased it when your children were born.
After the lender receives the appraisal, they will then take your age into consideration. These two factors will help them decide your exact payment. Once your final payment amount is decided you can figure out if you want one large check or a series of monthly payments. Many people like the lump sum payment so they can invest the entire amount and hope for some type of return.
One of the benefits of this type of loan, and it is a loan!, is that you can stay in your house until you pass away. It’s still your house; you haven’t transferred ownership to the bank.
You also need to make sure you keep paying for your house insurance and real estate taxes. Remember – the only thing that has changed is you no longer have a mortgage payment. Everything else remains the same.
When the time comes, your survivors (whoever will inherit your home) can sell your home and repay the lender. Again, you need to remember this is a real mortgage, a loan, that needs to be paid back. You didn’t sell your home to the bank, which is a common misconception.
With this type of mortgage, there are some pretty hefty fees and closing costs. Normally these can be deducted from the agreed to payment. Always have an attorney review anything you need to sign.
Want to find out more about reverse mortgage, then visit Brian Anthony’s site on how to choose the best reverse mortgage calculator for your needs.