Overview of Reverse Mortgage and Its Features
What is a reverse mortgage? Arizona and the nearby places are getting to know a lot about reverse mortgage. A reverse mortgage is a loan give to homeowners who are 62 years and older, thus they can convert their equity part into cash. This helps them the retirees having limited income to use their wealth accumulated in their home to fulfill their basic living expenses monthly and also to pay for their health care. Nevertheless, there is no rule on how the reverse mortgage proceeds may be used. This loan is referred to as reverse mortgage because here the monthly payments are not given to a lender; instead the lender makes payments to the borrower.
The borrower is not expected to return the loan until the home is vacated or sold. However, until the borrower survives and lives in the home, they need not make monthly payments to the balance of the loan.
Reverse Mortgage features
With reverse mortgage, the ownership or title of the home is retained by the borrower. At any point, the lender owns the home, though the last spouse surviving vacates the property permanently. The amount a borrower is eligible is based on the age of a person or the youngest spouse age in the couple is considered.
There is a limit on funds that a borrower can access after closing within a year or 12 first months. In case a borrower is eligible for a loan of $100,000, he can access only up to 60 percent or $60,000. In the thirteenth month, the borrower can take as little or as much of the remaining proceeds as they desire.
There are some exceptions such that a borrower is allowed to withdraw a little more in case an existing mortgage exists or there is other lien that needs to be paid off, if it is on the property. However, a borrower is permitted to withdraw sufficient enough to pay the obligations and additional 10 percent of the allowable maximum amount. Thus an additional 10 percent or $10,000 is the allowable amount of $100,000.
A reverse mortgage borrower undergoes a financial assessment done by the lender. This is done to ascertain the person can live in the property, pay homeowners insurance and also the future property taxes until the loan life. Lenders consider the income stream of the borrower, besides his investments, pensions and social security.