Important Facts You Need To Know About Reverse Mortgages
In order for a 62 yr old to convert the equity if their house into cash, they need to get a reverse mortgage. Understanding reverse mortgage and its ramifications are very important before an individual decides to get one. The things that are related to reverse mortgage will be tackled in this article.
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 every month that you are paying, the amount will go down while the equity of your house will go up. In a reverse mortgage, everything is doing the opposite. You will be able to convert the equity if your house into cash in a reverse mortgage. You will not be having monthly payments. There are different ways for the cash to be paid to you. You can have your cash in a single lump sum payment. If you wish, you can get your cash on a monthly basis. You can also out it 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 system in a reverse mortgage is that the equity of the house will go down while the loan amount will go up. The total equity of the house cannot be more than the reverse mortgage that was approved. 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. Your other assets including the assets of your house are protected by what is called as a non-recourse limit.
The principal amount including the interest should be paid. If the owner of the property dies, sells the house, or moved to a new home, then he has to pay the loan. 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. The next factor is that if the lender fails to maintain and repair their home. If the lender failed to ensure their house, then they will have to pay the loan. If there is a declaration of bankruptcy, then you will have to pay the loan too. The loaned amount also have to be paid if you abandoned the property. You will be required to pay the loan of you be misrepresented or if there is fraud somewhere.
It is important that you will not confuse yourself with home equity loan with reverse mortgage. These are different methods in obtaining money from your loan. The interest of the total amount of your loan needs to be paid monthly in a home equity loan.