The United States Department of Housing and Urban Development, more commonly referred to as HUD, has long been the leader when it comes to the home mortgage. Over time, we have watched the world of mortgage grow and evolve. One option that people need to educate themselves on has to do with the real value of what is reverse mortgage.
In answer to “what is reverse mortgage”, this is actually a private type of loan but one that is insured by the federal government. What makes a reverse mortgage unique is that a portion of the equity in the home is converted to cash, which can then be used by the homeowner in whatever way they see fit. Because qualifications and restrictions are associated with a reverse mortgage, it is used by the elderly, many times as a means of financial security.
One of the aspects of a reverse mortgage is that the homeowner does not have to have his or her income checked. Even so, to determine how much money can be taken out, the interest rate on the loan, and even the monthly payment, a number of things are looked at by the lender. As a starter, the borrower has to be at minimum, 62 years of age. Then, the homeowner must live full-time in the home, have adequate equity, and complete a special counseling session provided by HUD.
Although many people do not find value of what is in a reverse mortgage when going through the required counseling provided by HUD, this is actually highly beneficial. During this counseling session, the homeowner has the opportunity to ask questions and get help in making appropriate decisions. Once this process is complete and the other qualifications have been met, the application process can begin.
Of course, while there are many incredible value factors for what is a reverse mortgage, gaining knowledge about the good and bad is what will ultimately help the homeowner move in the right direction. As you will see below, consider the good and bad sides to a reverse mortgage prior to making your final decision.
Positive Aspects
The first value of what is a reverse mortgage is about having the freedom to spend the money as wanted. Some people have worked hard a lifetime and now in the “golden years” want to travel the world to enjoy the fruits of their labor. However, these funds can also come in handy in the case of paying bills or doing major repairs on the home.
However, one of the huge benefits of a reverse mortgage is that for many elderly living on a limited income from savings, pension, or Social Security, these funds can help supplement, making day to day living more manageable. Then, with the money being non-taxable and with no income restrictions, it is definitely a consideration for a lot of people.
Another area of value pertaining to what is a reverse mortgage is that instead of scrimping every month, barely getting by on money saved up, a pension, or perhaps Social Security or Disability, the money is a great supplemental income. Considering that any funds taken out of the equity for a reverse mortgage is not taxable, adding another benefit on top of the others.
Finally, if the homeowner were to pass away, any heirs would have the legal option to refinance the loan to that of a more traditional loan. However, there are variances of the reverse mortgage so is inheritance issues are important to the homeowner, these options need to be reviewed and analyzed carefully.
Negative Aspects
Unlike more traditional mortgages, a reverse mortgage is generally expensive to secure. Some of the connected costs include application fees, insurance, closing costs, appraisal, and in some cases, a monthly fee for the loan being managed by the lender. This in addition to the continuance of other home fees such as insurance, tax, repairs, homeowner association dues, and so on would need to be considered too.
Then, along with the value of what is a reverse mortgage, consider that for the application to be approved and the funding to become available, the house has to be in good order. This means the structure itself has to be sound and there should be no serious repairs. Even with this, there is a good note in that if the homeowner were faced with problems of repair, most lenders of a reverse mortgage would simply add the cost into the principal of the loan.
As you can see, there is a lot of information that follows the question of “what is reverse mortgage”. Learning all you can puts you in a position of making the best decision for you.
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