One of the greatest investments that most people have is their homes. This is due to the fact that acquiring a home is quite easy for a person who is in a permanent job especially through the use of mortgage plans. Most retirees and other seniors usually find their homes to be a very important asset especially in their retirement years. This is due to the fact that seniors can use their homes to apply for reverse mortgages in order to be able to meet their financial needs. Usually, the home owner is required to submit the home’s equity to act as security in order to be given a reverse mortgage loan. This program received a major boost in 2010 after it was backed by the Federal Government through Federal Housing Administration. This has been essentially of great importance as the Federal Government insures these loans thereby protecting the well being and liability of borrowers.
Advantages of reverse mortgages
Reverse mortgage loans have gone a long way in complementing Social Security benefits of senior people and as such they are able to achieve great financial independence. However, despite the many advantages that come with these loans, it is usually important to ensure that you take your time to think about the implications of these loans before applying for them. This is quite important in that it helps in ensuring that borrowers are able to make well informed decisions concerning whether to take or ignore these loans. These loans basically allow home owners to be able to convert part of equity of their homes and or condos to cash. While opting for these loans, it is usually quite important that borrowers should be able to ensure that they are in a position to meet taxes and other bills of their homes. Failure to meet real estate taxes and or bills leads to an automatic termination of the loan contract and eviction of the home owner. It is also important for applicants to be aware of brokers who greatly increase the processing fees of these loans.
When does a reverse mortgage loan mature?
While applying for a reverse mortgage loan, credit and income requirements are eliminated completely. As such, the borrower does not have to make any monthly or yearly repayments towards covering the loans. Maturity of the loan occurs after the lending contract between the lender and borrower is terminated. This is usually in situations such as death of the borrower or even when the borrower acts in bad faith and fails to observe the terms and conditions of the loan. Repayment of reverse mortgage loans is usually done once in a lump sum. There are no monthly repayments by the borrower in order to repay the amount.
Loan repayment amount
The repayment amount of the loan is usually inclusive of the principal amount and all the interests that the loan has accumulated. After the death of the home owner, the responsibility of repaying the loan is passed on to the heirs of the estate. The best thing about these loans is that if the home owner lives for a longer period than anticipated, then he/she stands to benefit more than the real worth of the home.