The mortgage is a very scary word. The borrowers need to commit to pay off the mortgage for many years. So, there is a lot of confusion on reverse mortgage. Here are some of the questions and answers.
What is a reverse mortgage?
The senior citizens who are over sixty one years old use the reverse mortgage to get a portion of the home equity. It is tax free, because it is more like loan advance. The borrower only repays when the borrower moves, dies, or sells the home property.
How is reverse mortgage different from traditional mortgage?
The borrower uses the home equity in reverse mortgage. Thereby, the home equity of the borrower decreases. The traditional mortgage is the exact opposite. The borrowers build home equity as the borrowers pay off the mortgage.
Traditionally, the borrower qualifies for the mortgage. The financial institution checks the credit history. If the borrower qualifies, the borrower pays monthly or bi-weekly mortgage payment. In reverse mortgage, the borrower defers mortgage payment as long as the borrower lives in the home.
How much can I claim from reverse mortgage?
The total amount to claim depends on age of borrower, value of home, and interest rate of mortgage. For example, the interest rate is nine percent. If the borrower is sixty five years old, the borrower can claim twenty six percent of the home equity. If the borrower is eighty five years old, the borrower can claim fifty six percent of the home equity.
Where can I use the amount from reverse mortgage?
There are three basic reverse mortgage types. It is single purpose reverse mortgage, home equity conversion mortgage, and propriety reverse mortgage. In single purpose reverse mortgage, the borrower can only use the amount for a specific purpose such as home improvements, and property taxes. In the other reverse mortgage types, the borrower can use the amount into any expenses.
The financial institution pays the reverse mortgage in the form of lump sum payment, periodic payment, credit line, or combination.
What are the requirements for reverse mortgage?
The borrower must be sixty two years or over, live in the home, took reverse mortgage counseling, or pay off most principal. The home qualifies if the home is principal residence, single family residence, one to four units, mobile home, or FHA condominiums. If the home is more than one unit, the borrower must live in one of four units.
What are the affect on my home property?
The borrower maintains the title and ownership of the home. That means the borrower still pays the maintenance, insurance, and property taxes. After the home is sold, the capital gains pay off the amount of reverse mortgage first. If there is any remaining amount, it goes to the heirs of the home property.
Does reverse mortgage affects Social Security and Medicare benefits?
The reverse mortgage is tax free amount. It is more like loan advance. However, the amount is liquid assets. It must maintain below the maximum allowable liquid assets to get the maximum benefit from Social Security and Medicare.