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Reverse Mortgages

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As you get older you may start to think about what you’re going to do with your house and existing mortgage. One new mortgage product that has become available in recent years is the reverse mortgage. Many people simply do not understand what a reverse mortgage is nor do they understand whether it is the right plan for them, or what the pros and cons are with having a reverse mortgage. Hopefully this article will shed some light on reverse mortgages for you to determine if it is the right option for you.

A reverse mortgage essentially offers you a cash payment that is calculated off the amount of equity the homeowner has in the home itself. When the homeowner dies, moves out of the home or sells the home they can defer their normal loan payments. If the homeowner dies, the homeowner’s heirs can decide if they wish to refinance the home in their own name for the current amount owed on the home, or they can give up the ownership to the financial institution owning the note. You will need to refer to specific rules regarding how they transactions can occur as the reverse mortgage is determined by your jurisdiction.

There are a number of things that can impact the amount of money you could expect from a reverse mortgage. Some of the things that impact the amount include the age of the youngest borrower or if there is a non-borrowing spouse that individual’s age, the current interest rate of the mortgage, the lower price of either the appraised value with a limit of $625,500 or the potential sales price and the initial mortgage insurance premium. If there are two borrowers though, the younger of the two is always the age used for calculations.

There are several different ways you can receive the payments for your reverse mortgage. These types of payments include the following: Tenure, a payment that is equal each month for the duration of the mortgage as long as the homeowner still occupies the property. A term is a payment method in which you will select the term for which you want your reverse mortgage or the number of finite months. You will then receive equal monthly payments throughout this term period. Line of credit is similar to more traditional lines of credit; you will take payments whenever you deem it necessary, but only until you exhaust the amount in the line of credit. Modified Tenure is essentially a blend between a tenure payment and line of credit for as long as you remain in the property. Modified Term is similar to modified tenure; this payment is a combination between term and line of credit for a pre-determined number of months. And the last option is the Single Disbursement Lump Sum, exactly as it sounds, but the lump sum is disbursed at mortgage closure.

One thing to keep in mind is in the near future some of the requirements are projected to change. In the past it was a much simpler formula. Soon you will need to meet certain qualifications. So look for a qualified FDA-Approved lender who specializes in the reverse mortgage product who can guide you through the process for the best success.

Written by Reza Abadi of USA Mortgage. USA Mortgage is the best company for home loans in Columbia MO, has to offer!

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