Reverse Mortgage has become a popular loan option for those who are in retirement and need financial assistance. Simply put, this is a type of home equity loan for senior homeowners who are 62 years and older. However, unlike the usual mortgage loans, you don’t have to pay for the amount you borrowed in a monthly or regular basis. The loan is only repaid when the homeowner passes away or they permanently move away to a different address.
Before you plan on applying for a reverse mortgage, it is best that you know how it works. Here are some things you must remember.
Reverse Mortgage and how it is Different with Traditional Loan
Reverse Mortgage works differently than other traditional loans. This is because with traditional loans your debt decreases while your equity increases as time go by. Whereas in reverse mortgage, since you don’t make any regular payments, the balance increase due to the interest and your property’s equity position becomes smaller. The upside? You can make pay some or all of your accruing interest anytime and without any penalty.
How much will you get with reverse mortgage?
With a traditional loan, the borrower can agree to a loan amount which is calculated using the percentage value of a home, your credit score and the type of property you have. Now in, reverse mortgage loan, the amount is determined by the age of the youngest senior homeowner, the value of your home and the current interest rate. Other factors that are considered when applying for Florida reverse mortgage are expenses you have when obtaining the loan and also if you have any existing liens or mortgages which you must pay in full.
The final amount will now belong to you or your heirs. You must also remember that funds from reverse mortgage are tax-free and you have several flexible payment options to choose from.
Here are some other things that you need to know on how Reverse Mortgage works:
- The youngest homeowner’s age will be used when calculating for reverse mortgages.
- You get a portion of your home’s equity
- The funds you get from your loan are tax-free.
- You don’t have to pay for any monthly mortgage repayments.
- Your loan will only be repaid when you sell your home, you move to a different address or when you die.
Your retirement years should be one with no worries and less stress. Reverse Mortgage can give you that financial aid you’ve been wanting without the inconvenience of worrying about monthly payments and penalties.
If you are unsure whether reverse mortgage is your best option, then feel free to contact us and we can have someone with the expertise to discuss this with you.