Important Facts You Need To Know About Reverse Mortgages
One of the many ways in order for a 62 yr old to turn their house equity into cash is through 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. When it comes to reverse mortgage, everything is the opposite. It is a reverse mortgage that you can convert 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. If you want, you can get it on a single lump sum payment. You can also have it on a regular monthly amount. If you wish, you can also place the cash on a credit line account.
It is in reverse mortgage that the owner of the house still owns the property while also getting the cash that they need. The loan amount will go up while the equity of the house will go down, that is how reverse mortgage works. The total equity of the house should be as the same value and not higher with the cash loaned in a reverse mortgage. It is very important that the lender will not seek payment of the loan from anything other than the total value of the house itself. The non-recourse limit is the one that protects your assets and the assets of your heirs.
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. But if none of these occurs, then there is no need to pay the loaned amount.
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. The loan should also be paid if there is a declaration of bankruptcy. If you will abandoned your house, you also have to pay the loaned amount. If there are fraud and misrepresentation somewhere, then you will be required to pay the loan that you borrowed.
Reverse mortgage should not be mixed with home equity loan. These can be methods to obtain money from your equity but they are totally different. The interest of the total amount of your loan needs to be paid monthly in a home equity loan.
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