Important Facts You Need To Know About Reverse Mortgages
In order for a 62 yr old to convert the equity if their house into cash, they need to get a reverse mortgage. But it is very important for an individual to really understand what this is and its ramifications. In this article, we will be talking about everything that is related to reverse mortgage.
If you are going to have a normal home loan, the thing that you will have to do is to pay the principal amount as well as the interest. In a normal house loan, as you are paying your monthly dues, your borrowed amount will go down while the equity if your house will go up. Everything is opposite when it comes to reverse mortgage. It is in a reverse mortgage that you can turn the equity of your house into cash. You will not be required to pay the monthly payments. The cash that you need can be paid in different ways. You can have your cash in a single lump sum payment. If you wish, you can get your cash on a monthly basis. If you wish, you can also place the cash on a credit line account.
The cash that they wish to have can be theirs including the house that they owned. The system in a reverse mortgage is that the equity of the house will go down while the loan amount will go up. The total equity of the house should be as the same value and not higher with the cash loaned in a reverse mortgage. The value of the house should be the same value that the lender must seek. Your other assets including the assets of your house are protected by what is called as a non-recourse limit.
But it is very important to pay the accrued interest as well as the principal amount. You will have to pay the loan if the owner of the house dies, sells the property or moved to another home. The loan amount will not have to be paid, if none of these instances occurred.
The lender will have to pay their loan if these circumstances also happen. The property tax that wasn’t paid can be a factor for the lender to pay their loan. If the lender fails to repair and maintain their home, they would have to pay their loan. The loan will be paid off the lender will fail in ensuring their house. You will have to pay the loan if there is a declaration of bankruptcy. The loaned amount also have to be paid if you abandoned the property. If there are fraud and misrepresentation somewhere, then you will be required to pay the loan that you borrowed.
A home equity loan is different from reverse mortgage. These can be methods to obtain money from your equity but they are totally different. It is in a home equity loan that you will be required to pay the interest of the total amount that you have loaned.
Source: reverse mortgage myths