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Reverse Mortgage For Senior Citizens
Most of the elderly people, or retired persons have been undergoing a severe financial strain due to lack of more avenues for a regular stream of income to live their life peacefully. The reality is that while their expenses are on the increase the incomes are on the other way. Even for people who have some knowledge of Reverse Mortgage are seeking the help of financial experts for proper guidance. This article provides you with details on Reverse Mortgage so that you can even help guiding those who are seeking a financial support.
A Reverse Mortgage is a loan that allows seniors to boost their income by converting a portion of the equity they have built in their home into cash. This cash is not taxable and typically it doesn't interfere with eligibility for Social Security or Medicare benefits. The exception is the federal Supplemental Security Income Program, where beneficiaries must keep their liquid resources under certain limits.
The majority of reverse mortgages are Home Equity Conversion Mortgages (HECMs), and are therefore guaranteed by the FHA. In order to help homeowners with properties that exceed FHA lending limits, various proprietary products have been created.
Qualifications for a Reverse Mortgage are simple. All titleholders must be 62 or older and have equity built up in the home. There are no income or credit qualifications. The following qualifications can actually be paid for by the Reverse Mortgage proceeds. Existing mortgages or liens have to be paid off, and the homeowner must remain current on insurance and property taxes.
A reverse mortgage borrower has no restrictions on how the monies can be used. Here are common uses for these funds:
- Paying off debts, often credit cards and mortgages.
- Remodeling projects or other home improvements
- General living expenses
- Vacations and travel
- Health care costs or long term care
- Assisting children with financial obligations
- Education
- To fund hobbies
- To defray the rising cost of property taxes
The proceeds available from a Reverse Mortgage vary depending on FHA lending limit's and other factors like borrower's age, value of the home, and interest rates. Typically the older the borrow, the higher proceeds available. Proceeds from the loan can be paid in a lump sum, in monthly payments, or extended as a line of credit available when needed.
The costs of a reverse mortgage are similar to those for any loan: origination fees, closing costs. HECM loans also carry a charge for FHA Mortgage Insurance Premium (MIP) coverage. Typically, the borrower sees no out of pocket costs, as these items can be paid from the proceeds of the transaction. Reverse mortgage borrowers have various consumer protections. These products are non-recourse consumer loans, meaning the loan payoff amount cannot exceed the value of the home. Customers must attend a counseling session and review their finances with a trained reverse mortgage counselor before they are eligible to receive a reverse mortgage. The AARP trains many of these counselors, whose role is to make sure the customers understand the details of the transactions, costs, and other possible alternatives.
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