2019/2020 RESERVED MORTGAGE LOAN INFORMATIONS AND BEST WAY TO APPLY FOR LOAN - 300montford

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Thursday, January 17, 2019

2019/2020 RESERVED MORTGAGE LOAN INFORMATIONS AND BEST WAY TO APPLY FOR LOAN



Reverse mortgage Loan, also known as the home equity conversion mortgage (HECM) in the United States of America,  can be seen as a financial product for homeowners at the age of 62 and above who have accumulated home equity and want to use this to supplement retirement income. Unlike a conventional forward mortgage Loan, there are no monthly mortgage payments to make. Those to whom money are lend to are still responsible for paying taxes and insurance on the property and must continue to use the property as a primary residence for the life of the loan.
These loan products can be a challenge to explain or understand, To some people who have a lot of financial experience. We’ve put together this nice and vital article in hopes of better explaining the basics of mortgage loans. In general, it’s the easiest to explain these loans by beginning with a comparison to a better known financial product, the home equity loan. At its core, the reverse mortgage is a home equity loan that’s designed to help seniors tap into the equity in their homes. This loan is only available to homeowners who are 62 or older and have built up substantial home equity.
The other unique Characteristics of a reverse mortgage are best explained by a comparison to traditional forward mortgages. In a forward mortgage, the borrower makes monthly payments to the lender, gradually reducing the loan balance and building equity. With a reverse mortgage, the borrower receives payments from the lender and does not need to make payments back to the lender so long as he or she lives in the home and continues to fulfill his or her basic responsibilities, such as payment of taxes and insurance. The loan balance grows over time as the borrower receives payments and interest accrues on the loan; home equity declines over time. Essentially, the mortgage works in the reverse direction of a forward mortgage, which is where the term “reverse” comes from.
All loans must eventually be repaid, and this one is no different. The loan is due once the borrower sells the home or passes away. Of course, the borrower may also choose to pay off the loan at any time. In most instances, a reverse mortgage is paid off when the mortgaged home is sold. It is important to note that reverse mortgages are designed so that the amount owed cannot exceed the value of the home. If, for example, a reverse mortgage balance is $150,000, and the house is sold for $125,000, the borrower does not owe the difference. If the house can be sold for more than the value of the reverse mortgage, that equity belongs to the borrower or the borrower’s estate.

Who is Eligible for a Reverse Mortgage?

One of the strengths of the HECM program is that there are not overly restrictive requirements, making these loans easier to qualify for than other financial products such as a mortgage refinance, home equity loan, or home equity line of credit (HELOC).
You are eligible for a reverse mortgage if:
  • You are 62 years of age or older
  • You own your home and use it as your primary residence
  • The house is single family, multi-family (up to 4), or an approved condominium or manufactured home
  • You own your own home free and clear or only have a small amount left to pay on the existing mortgage
  • Your home is in good condition prior to taking out the loan
You must meet with a HUD approved counselor before obtaining a reverse mortgage to determine if the product is suitable for your needs. The counseling sessions will help you understand how the loan works and different alternatives that are available to you.
All prospective borrowers must also undergo a financial assessment to qualify. This assessment makes sure that the borrower can pay for:
  • Property taxes
  • Homeowner’s insurance
  • Basic home maintenance
  • Home Owner’s Association (HOA) fees if applicable



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