Financial products are often confusing and complex. They come with hazards, but, if chosen wisely, and if the norms are followed promptly, then they provide carefree years. One such option is Reverse Mortgage which provides loan to senior citizens against their house. To get a better insight on the scheme the reverse mortgage factsheet is presented which will be helpful to you senior citizens who are considering this option.
Reverse mortgage factsheet provides information about Reverse Mortgage which is a loan given to the borrower from the financial institution which is not required to be returned till the time the borrower resides in the house. The money could be paid to you all at once or in the form of monthly instalments or in the form of breakdown opted by you. As the name suggests, the reverse happens i.e. the lender pays the borrower.
The reverse mortgage process has certain requirements. Firstly, at least one of the owners should be of 62 years of age or more. Secondly, the house against which the loan is been taken should be your primary residence i.e. you must be residing there for most part of the year. Also, you should not fall behind on any of your debts. Your home should be located in US and it should be a single family residence or part of planned unit dwelling which is approved by the HUD.
The loan cost includes loan fee and interest rates. Other costs include application fee, origination fee, closing fee, insurance and monthly service charge. These costs can be paid through the loan advances which means they will be added to the loan balances.
The most popular type of reverse mortgage is Home Equity Conversion Mortgage regulated by the U.S. Department of Housing and Urban Development (HUD). This loan is given by the bank but is insured by HUD. The insurance fee is 1.25% of the loan balance and protects the borrower from two scenarios: 1)In case of failure of payment 2) In case the value of the house, at the time of repayment, is less than the total loan amount taken by the borrower, the difference is paid by the government insurance fund.
The home equity conversion mortgage reverse mortgage processincludes the following steps:
– A third party counselling is required which must be provided HUD approved counsellor and is mandatory for HECM Reverse Mortgage.
– Submission of application which also determines the type of loan disbursement required.
– The lenders will finalise the parameter and submit the application to underwriters to process.
– Inspection and appraisal of the house will be done to evaluate its market value.
– Approval of Loan.
– A three day window period is provided if you want to change your mind and cancel the loan. Post three days the loan is disbursed.
– Repayment i.e. the mortgage becomes due under any of the below circumstances:
· The house is no longer being used as a primary residence
· It is sold
· The borrower passes away
The HECM reverse mortgage process has a requirement for borrowers according to which the house should meet the minimum property standards set by HUD
The reverse mortgage factsheet mostly sums up the necessary information. However, the common mistake done by people is that they do not understand the mortgage they opt. It’s very important to understand what you are getting into. Have complete information. Take measures not to fall behind your taxes and insurance. But as said earlier, it could be beneficial if the norms are followed and can provide a life free of financial worries and insecurities.