What is a Reverse Mortgage?
One of the most common type of federally-insured mortgage formally known as a Home Equity Conversion Mortgage (HECM) is called a reverse Mortgage. The Reverse mortgage loans California gives eligible homeowners access to their home equity in the form of a loan advance.
The mortgage has helped millions of American seniors to remain in their homes while having access to a flexible credit or even accessing cash in a lump-sum to supplement their retirement income.
How a Reverse Mortgage Work
Traditional mortgages require borrowers to commence monthly mortgage repayment to lenders immediately after the loan closes. The loan balance continues to decrease with each monthly payment of the principal and interest.
The process is reversed in a HECM or reverse mortgage. Instead of making monthly repayments, the lender pays the borrower money upfront either in a lump-sum or over a certain period.
The exact amount you can receive depends on the appraised value of your home, the equity of your home, the age of the youngest borrower (if you have a spouse), and other factors.
The Reverse mortgage loans California becomes due for full repayment when the borrower moves out of the property, sells the home, or dies. In any case, the loan is paid back through a handful of repayment options.
Who is Eligible for a Reverse mortgage loans California?
- They live in the home as their primary residence
- The home meets the HUD property standard
- The intending borrower has no outstanding federal tax liens
- They do not owe property tax for the last two years
Common Myths About Reverse Mortgage Information
Many people are family with traditional or “forward” home equity mortgages. But there is quite a bit of misconception when it comes to reverse mortgages.
We have compiled some of the common myths and also present the facts to help you get a better understanding of what a reverse mortgage is and how you can benefit from it.
You can be evicted from your home for not paying a reverse mortgage
That’s not necessarily correct. Reverse mortgages are primarily designed to help older homeowners live in their homes for the rest of their lives. Borrowers do not need to make monthly mortgage payments, so they cannot default on a reverse mortgage payment and be forced out of their homes.
Instead, eligible borrowers receive payments in a lump-sum, monthly for a specified term, or the remainder of their lives.
However, all borrowers have to pay property taxes, homeowner insurance, and also maintain the home.
A reverse mortgage is the last resort for desperate homeowners
Reverse mortgages are powerful instruments, which allow seniors to explore the rich world of their financial options and make the most of their financial plans.
The tool is never a last resort or meant for desperate people. Instead, it can help homeowners to access additional retirement income, pay off an existing mortgage, create a line of credit, or even delay the need to access social security.
With a reverse mortgage, the home belongs to the lender
That is outrightly incorrect. The title of the home remains in the name of the homeowner and they retain full ownership of the home, as long as they live in it and fulfill all the loan terms.
Lenders or banks are interested in making a profit from the interest on the loan instead of taking over homes.
You have to pay tax on money from a reverse mortgage
Payment from a reverse mortgage is part of your home’s equity, which technically belongs to you. The money is seen as the proceeds of a loan not income, meaning they are not taxable.
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