Is A Reverse Mortgage A Good Option For You?

by Neil Upshaw on December 19, 2011

What if you might get a mortgage where the bank actually pays you every month, rather than you paying them? Well, as crazy as this sounds, this can basically be a reality if you're aged 62 or older. This is precisely what a reverse mortgage can offer you. There are plenty of ways a reverse mortgage can work, and this is one example.

A reverse mortgage is simply a loan which is secured against the equity in your house. The maximum amount that can be borrowed is 65% of the property price or an absolute maximum of $625,000 (Note: these maximums may change in time so it is worthwhile you getting into contact with a pro mortgage counsellor to see what the restrictions are at the time you are prepared to take out your loan). Also the property being mortgaged must be the candidate (s) primary residence.

Other influences that may come into effect when you're prepared to reverse mortgage your home include the age of the youngest borrower, as we claimed, the current cost of your home, and the prevailing interest rate. A good rule of thumb is that the older the the younger borrower is, the lower the IR is probably going to be.

No more than 3 folk can sign up for this kind of mortgage on a single property and it's necessary to remember that the lending institution must be the 1st lien holder, otherwise you'll be turned down for this sort of loan.

So what are major advantages of a reverse mortgage? The most significant advantage is that the home owner has the possibility of living in their home for the remainder of their lives, should they select, without needing to pay a once per month home loan payment. The amount borrowed, and the interest, won't have to be paid back until one of 3 things happens:

1. The home is sold
2. The property owner buys another residence, and take that up as their first residence
3. Or if the mortgage holder (s) pass away.

When a candidate takes out a reverse mortgage, they have the selection of having a lump sum paid to them, or having the cash placed into a monetary institution where they can draw down the money as they wish, or the money can be paid to them on a monthly basis. There aren't any restrictions on the way the cash may be employed. So if the aged home-owner wishes to employ the cash to go, to pay each month bills or maybe to save their home from foreclosure then there are no rules to prevent this.

What are the negatives of taking out a reverse mortgage? Well there are a few to think about. First off the upfront charges and fees are significantly higher than a regular mortgage. And the borrow does have to take out a compulsory mortgage insurance. Clearly, if the home owner lives a long time then the accrued interest can be fairly high, and less money could be left to leave to heirs.

Secondly, dependent on the state the borrower lives in, having a lump sum from a reverse mortgage could have an impact on Medicaid benefits. Taking into consideration the age and health of the borrow suggests that this is a serious consideration to keep in mind.

Overall a reverse mortgage can be a good thing, but there is no one package fits all solution. If you are over the age of 62 and are looking to take out a mortgage on Naples Florida real estate , then this is going to be the ideal solution for you, so don’t discount it without first getting all of the info. So it is always wise to consult with an independent mortgage advisor to discuss your unique desires before entering into an agreement or this, or any, sort of mortgage.

Neil Upshaw is a freelance writer and Naples Florida Real Estate Agent. If you are seeking homes for sale in Naples Florida then visit http://naplesfloridarealestate1.com/ today

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