Some Things You Didn’t Know
I think you’ll agree with me when I say…
There’s a lot you of information you can pick up from reverse mortgage programs.
Nevertheless, with the limited research options and expenses that come with consulting professional advice, getting the right information on equity release might be challenging.
Lucky for you, here’s a comprehensive guide to the facts about reverse mortgages.
Hopefully, you will get the answers to the things that have been bugging you about this life-changing product. If not, please be sure to click here and see how much equity you can release and chat with an expert.
Get to Learn the Truths About Reverse Mortgages
The reverse mortgage1 market has been breaking records since its conception. From £1,000,000 in 2011 to £4,000,000 in 2018, and more equity firms project that the reverse mortgage industry will hit a record of £6 million by 2020.
Need more info about a reverse mortgages? Have a look at What’s Reverse Mortgage?
With this offering the best services to homeowners, you are probably considering applying for it too and get to enjoy your retirement,but you are still not sure about what it entails.
Well, here are some of the facts about reverse mortgages that might keep your mind at ease:
#01. Reverse Mortgages Have Various Pay-out Options
Unlike other mortgage schemes, reverse mortgages provide you with several payout options for you to tap your home equity. The Federal Housing Administration (FHA2 ), as mandated by the federal law, propose five payment options:
- One method encompasses taking equal monthly disbursements that run as long as one borrower is still alive and lives in it as his/her principal dwelling
- The other is a fixed term of years, after which time you will stop receiving monthly payments even if you’re still living in it,
- There’s also the flexible line of credit which gives you the option of selecting how much and when to take your cash out, up to the highest amount of the line
- In addition to those three, you can opt to combine lines of credit with the first two monthly-payment options. These two hybrid choices enable you to use a portion of the available funding for a range of credit and getting the rest through either of the two monthly-payment options.
#02. You May Lose Your Estate
Since its inception, most reverse-mortgage providers have falsely advised their clientele that they can’t lose their properties with a reverse mortgage.
While reverse mortgages do suggest some safety to leaseholder, they still need you to keep up with your end of the bargain, and usually, there are ominous consequences if you don’t.
Some of the accountability involved with taking out a reverse-mortgage include paying repairs fees, the homeowners insurance, and p taxes.3 Many lenders will monitor you to ensure that you heed to your contract and keep up with those responsibilities. If you don’t, they then take action on the mortgage, with options that include foreclosure.
In recent years, the FHA has seen up to 60% of homeowner take out large lump sums in instead of using the monthly payment strategy. Those householder then quickly use up the cash and within months find themselves unable to handle the costs of keeping up their home.
#03. Who’s Listed on the Reverse Mortgage Program Is An Important Aspect
Many families have found themselves in a pickle recently with reverse mortgage lenders because they listed only one owner as the primary borrower.
The benefit of listing one, preferably the older member of a couple, is that it automatically boosts your monthly payment or allowable loan amount. However, the much more significant issue is that the assurance that you’ll be permitted to stay in your house while it’s your dwelling extends only to the named borrowers, not to spouses or anyone from the family.
Therefore, as a result, in circumstances where the named mortgagor breathes their last or moves into permanent care, the lenders have a foreclosure on surviving spouses who weren’t listed on the reverse mortgage scheme.
#04. You Have to Beware of the Unscrupulous Lenders Out There
Puny estate values and cumulative complaints about reverse mortgage schemes have caused a rift in the market with some of the reverse mortgage companies exiting the field.
One of the most affected reverse mortgage lenders is the Bank of America (BAC), among others. With these firms leaving a space in the field, smaller mortgage brokers and lenders have started taking their place.
However, while some of these smaller firms are reputable, others can push you into mortgages that make it challenging for you even to afford the regular repairs and other costs you’re mandated to cater to under a reverse mortgage.
#05. Reverse Mortgages Only Offer You a Percentage of Home Equity
Reverse mortgage schemes don’t suggest you access to the full equity you have in your house. Instead, the FHA calculates the full mortgage amount depending on the age of the youngest homeowner, existing interest rate, and the appraised value of your lot.
You also have to cater to the costs that come with taking out a reverse mortgage, which includes mortgage insurance premiums, third-party lender charges, and origination and servicing fees. Most providers will work these costs into the loan amount they offer you, thus lowering your net proceeds even further.
#06. The Government Doesn’t Originate Reverse Mortgages
The government covers HECM, the FHA’s reverse mortgage program, which safeguards you and your provider, but it’sn’t a lender. Reverse mortgages are mostly programs proposed to homeowners by private firms.
So let no one confuse you by advertising that as a “government loan”.
#07. You Have to Reside in Your Current Home
You can only use the loan if it’s your primary dwelling. If you stop residing in your home for 12 months, the loan will become due and payable.
#08. The Bank Doesn’t Take Ownership of Your Home
Contrary to most householders’ beliefs, the bank doesn’t take ownership after getting a reverse mortgage; you keep the proprietorship and title of the property.
Therefore, as long as you continue to honour the stipulated loan terms, like paying taxes and home insurance4 while occupying the house as your prime residence, you can retain ownership of your house.
It would be best if you also kept in mind that a reverse mortgage is still tenable with interest in the property, so in the rare event that you fail to comply with terms of the lease, your home may go into foreclosure.
#09. You Have to be Older Than 62 to Take Out a Reverse Mortgage
If you decide to take out the mortgage as a couple, the base age of the borrower must be at least 62 years old.
#10. Inheritance is Usually at Risk
Inheritance and reverse mortgages are one of the most debated matters. Some argue that you might cease ownership of your land and give zero to nothing for your family, while others say that you can choose to pass a portion of your land to your heirs.
The thing is, unlike other mortgages, when the reverse mortgage reaches maturity in the future, your heirs may opt to sell the property to repay the mortgage.5 If that is the situation, then they will become heirs to all the outstanding equity of your home after they payback the loan.
With the realty field rapidly appreciating every day, homes typically continue to appreciate in value and thus often enabling you to retain equity for your beneficiaries. Your family may also decide to keep your home as inheritance and repay the loan another way, like refinancing it into a conventional mortgage. Either way, your family doesn’t end up loosing all their inheritance.
Reverse mortgages can be a valued tool to aid you in making ends meet, but they can also be tremendously dangerous and put you at risk. Therefore, before following through with a reverse mortgage scheme, be sure that you fully understand the stipulated terms and shop around to get the best deal you can. Ideally, the best way to ensure you’re making a smart decision is to find a professional adviser who doesn’t have an interest in getting you to take out the reverse mortgage.
If you have further questions about reverse mortgage schemes be sure to click here and see how much equity you can release and chat with an expert.