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Reverse Mortgages, Getting a Good Deal In 3 Easy Steps!
By Vincent Dail
Reverse Mortgages, Most Common Features:
A reverse mortgage is a special type of loan that seniors
can sometimes get to convert the equity in their homes to
cash.
Many reverse mortgages offer special appeal to older adults
because the loan advances, which are not taxable,
generally do not affect Social Security or Medicare benefits.
Originally designed for retirees interested in keeping their
homes but whose incomes aren't sufficient to support them,
reverse mortgages have typically been used to help people
on low fixed incomes make ends meet, make needed home
repairs or pay for large medical bills that otherwise would
be unaffordable.
Depending on the plan, reverse mortgages generally allow
homeowners to retain title to their homes until they
permanently move, sell their home, die, or reach the end of
a pre-selected loan term.
Generally, a move is considered permanent when the
homeowner has not lived in the home for 12 consecutive
months. So, for example, a person could live in a nursing
home or other medical facility for up to 12 months before
the reverse mortgage would be due.
However, be aware that:
Reverse mortgages tend to be more costly than traditional
loans because they are rising-debt loans.
The interest is added to the principal loan balance each
month. So, the total amount of interest owed increases
significantly with time as the interest compounds.
Reverse mortgages use up all or some of the equity in a
home. That leaves fewer assets for the homeowner and his
or her heirs.
Lenders generally charge origination fees and closing costs;
some charge servicing fees. How much is up to the lender.
Interest on reverse mortgages is not deductible on income
tax returns until the loan is paid off in part or whole.
Because homeowners retain title to their home, they remain
responsible for taxes, insurance, fuel, maintenance, and
other housing expenses.
Getting a Good Deal.
If you decide to consider a reverse mortgage, shop around
and compare terms.
Look at the:
Annual percentage rate (APR), which is the yearly cost of
credit. type of interest rate. Some plans provide for fixed
rate interest; others involve adjustable rates that change
over the loan term based on market conditions, number of
points (fees paid to the lender for the loan) and other
closing costs.
Some lenders may charge steep costs, which your lender
may offer to finance. However, if you agree to this, you'll
take out fewer proceeds from the loan or you'll borrow an
extra amount, which will be added to your loan balance and
you'll owe more interest at the end of the loan. Total
Amount Loan Cost (TALC) rates.
The TALC rate is the projected annual average cost of a
reverse mortgage, including all itemized costs.
It shows what the single all-inclusive interest rate would be
if the lender could charge only interest and no fees or other
costs. payment terms, including acceleration clauses.
They state when the lender can declare the entire loan due
immediately. Under the federal Truth in Lending Act, lenders
must disclose these terms and other information before you
sign the loan.
On plans with adjustable rates, they must provide specific
information about the variable rate feature.
On plans with credit lines, they must inform the applicant
about appraisal or credit report charges, attorney's fees, or
other costs associated with opening and using the account.
Be sure you understand these terms and costs.
About the Author
Debt elimination programs reviewed is run by Vincent Dail. Get the debt elimination tips you need, today! To receive your free special report visit: Debt Elimination Programs
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