For seniors who are already enjoying their retirement benefits, the greatest worry is how to afford the best healthcare. If you are a senior and you have problems paying for your health care and other daily expenses, you may want to consider a reverse mortgage. The amount received from mortgage companies in Utah or Arizona, can finance your medical bills, home renovations, repay an existing Arizona or Utah home mortgage, or pay for your vacation.
Unfortunately, not many people understand how the reverse mortgage works and how it could be the perfect solution for YOU!
In this post, we provide answers to some of the frequently asked questions, regarding the reverse mortgage.
1. What is a Reverse Mortgage?
The reverse mortgage is a home equity loan available to adults aged 62 years and above, allowing them to borrow against their homes.
Therefore, unlike the conventional Arizona or Utah home mortgage, the reverse mortgage borrower is not expected to pay monthly loan repayments. So, if the borrower defers the payments or moves out of the property, secures the loan.
The reverse mortgage is classified under the Home Equity Conversion Mortgage (HECM) and is backed by the Federal Housing Authority.
2. What is the maximum age required to qualify for a reverse mortgage?
The reverse mortgage is available for those older than 62 years, and there is no maximum age required for one to qualify for the mortgage. Statistics show that adults aged 62 and 75, are actively applying for a reverse mortgage. The older the borrower of the reverse mortgage is, the more he can qualify for, but this is also dependent on the value of the property. This is based on the fact that older people have a lower life expectancy, showing that the life of the loan is relatively shorter.
Another reason why older borrowers of a reverse mortgage qualify for more amounts is the high home equity at the time of application.
3. Are heirs responsible for the reverse mortgage?
No, the heirs of the reverse mortgage borrower will not be accountable for the remainder of the loan balance, in case the loan balance is more than the appraisal value of the property.
In addition, they are not held responsible for repaying the loan at any moment, unless after the borrower has died. After the death of the borrower, a timeline is allowed to the heirs, during which they determine what to do with the estate. The timeline of events is usually 30 days, during which the processing of death certificate elapses. Therefore, the Scottsdale home loans lender sends a notice to the heirs allowing the heirs to proceed to clear the loan balance,
The options available to the heirs include:
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4. How much can you get from a reverse mortgage?
The amount that you can get through the reverse mortgage depends on the home equity amount. Note that the Arizona or Utah home mortgage company will not allow you to use more than 80% of property equity. In addition, the age of the borrower is the determining factor when calculating how much you qualify for, through the reverse mortgage option.
5. What are the types of loan payouts when you take the reverse mortgage?
The borrower can choose how the amount will be paid out. Therefore, one might choose that the whole amount is paid in a single lump-sum amount, to the borrower’s account. Alternatively, the borrower can instruct the lender to pay monthly amounts.
Another option is the hybrid payout, where the borrower receives certain percentage as lump sum and the rest is paid in monthly amounts.
Lastly, the line of credit allows the borrower to withdraw the cash as needed. With the line of credit option, the amount paid out may eventually be more as you earn some interest from the amount.
6. How much does it cost to apply for the reverse mortgage?
The reverse mortgage is considered a loan so there are various costs associated with taking the loan. The different types of costs include the interest on the loan, the appraisal fee, the interest rate, and the origination fee.
7. Do I need a Reverse mortgage?
Whether you need a reverse mortgage or not, depends on the financial requirements, if you do not have an issue with current cash flow, then you do not need the loan. However, if whatever you are left earning does not cater to your daily requirements, the reverse mortgage is a great idea.
A reverse mortgage is a good alternative for elderly persons who do not have sufficient cash flow to cater to their needs. Before taking out a reverse mortgage, talk to an expert who will help you understand the requirements and the financial implications.