The Advantages Of Reverse Mortgages
Just like other financial transactions, reverse mortgage has its own share of myths and urban legends with an objective to discourage potential borrowers from filling their application. These widespread misconceptions tend to overshadow the many advantages of getting this type of mortgage. So, here’s a brief discussion on the many different advantages of reverse mortgage.
This kind of mortgage is insured and designed by the US government for older individual, seniors to be more exact. The security is supported by the federal government and that’s why you can be guaranteed that all the transactions are transparent and balanced. As a matter of fact, during inopportune moments that your loan application is your higher than your home’s value, then you don’t have to pay the excess amount.
The repayment of the loss will be dealt with by the insurance firm that has underwritten your closing deal. Aside from that, the proceeds of the cash amortization whether given to you lump sum or on a monthly basis will be tax free. The method of releasing the payment will depend on what you want. The tax will be applied when you repay the loan later on in the future.
Compared to other loan or mortgage applications, reverse mortgage has no income or credit requirements. You just have to be at least 62 years old as well as the property title owner. This kind of mortgage is made to give financial support to the elderly and that is why stringent requirements are not imposed so that it could accommodate several potential borrowers.
As long as you stay in your primary residence, you will be in under no obligation to pay off the loan. You will still own the house and the property title will not be taken away from you. It will also not be changed to the lender’s name. This gives you two primary advantages, staying at a comfortable shelter while enjoying a financing that’s tax free. If the loan has already been repaid, the remaining equity would go to you or to your estate in case you die. If, for instance, the loan obligation is more than the home’s total equity, you will still be at an advantage thanks to the non recourse feature of the reverse mortgage.
The majority of borrowers use their money to fund their everyday expenses. The lenders of reverse mortgage will not ask you to make big ticket expenses so the loan will be justified. It is you decision how you want to spend your money. It could be for groceries, medical maintenance, travel, home repair, and etc. Reverse mortgage could also be used to fund your Medicare or Social Security benefits. It won’t affect the payments you will get from the said institutions and you will still receive the same amount that you’ve been getting before.
The advantages of reverse mortgages outweighs the myths that have been spread about it. It is a wonderful response to the current trend for families who have seniors that live much longer and actively by themselves. The recent culture today show kids live apart from their guardians or parents so they can follow their dreams even if that means going to a different state. Family houses are rarely passed on to the next generation because of real estate taxes and higher maintenance costs. Apart from that, most homeowners want only to have and maintain a single house.