What is a Reverse Mortgage?
The reverse mortgage refers to a type of loan made based on your house’s value.
If you have a reverse loan the borrower isn’t selling your house in exchange for a loan. You are still the owner of the title to your home, and you can remain in your house.
A reverse mortgage implies that you don’t have to begin making payments for the principal or interest for a long period.
What Should I Know About Reverse Mortgages?
You can receive the funds from reverse mortgages in installments over a period or as a lump amount. Every time you pay your lender the lender will earn equity in the home. Throughout the term of your reverse loan, you will not have to pay any fees other than your property and home insurance taxes. When the loan is due to be paid back, the borrower (or his estate) has to pay back the entire amount plus interest.
You could be eligible to obtain a loan of as much as 55 percent of your house’s total value. This depends on the age of your home, its appraisal value, the current interest rates and the lender selection. The more advanced your age and house’s worth, the more the reverse mortgage you may obtain.
The interest rate for reverse mortgages is set when drafting the loan contract. The interest rate is based on the type of loan, whether variable or fixed. It also depends on the location you reside, the home’s worth, and your age and spouse’s age. The interest is calculated every month but you do not pay rate of interest till the loan is paid. The interest is added to the remaining amount due on your mortgage.
You must repay the loan if you decide to move or sell your house. If you die the estate or spouse will be required to repay the loan. Most of the time the property is auctioned off, and the proceeds are used to pay back the reverse mortgage and interest.
How Do I Qualify For A Reverse Mortgages?
For a reverse mortgage to be eligible, you must be at minimum 55 years old. If you are a homeowner the reverse mortgage lender will usually insist that these be paid off before arranging your reverse mortgage. In certain instances the reverse mortgage lender may be able to settle your current non-mortgage loans as well. The property is considered your primary residence, meaning you have to live there for at least six months per year.
Benefits of a Reverse Mortgage
You can get the reverse mortgage in various ways including an initial lump sum, a regular monthly installment or a mix of both. It is possible to use the money to purchase anything you like There are no limits. Reverse mortgages offer you the ability to invest in home improvements or repairs or repay debts or other expenditures. The Canadian government does not view reverse mortgage proceeds as income tax-deductible. If you’re an older person with a pension, your old-age security is not affected due to the reverse mortgage since the government doesn’t consider it taxable income.
So how can you know if a Reverse Mortgage is right for you?
It’s important to speak with a professional, such as a Coquitlam mortgage broker, who can help you understand the benefits and drawbacks of a reverse mortgage and help you determine if it’s the right choice.
When speaking with a Coquitlam mortgage broker, they will help you understand the terms and conditions of a reverse mortgage and help you evaluate whether or not it’s the right option for you. They can also help you compare reverse mortgages to other options, such as a home equity loan or a traditional mortgage, to help you make an informed decision.
Conclusion
In summary, a reverse mortgage can be a great option for seniors looking to tap into the equity in their home, but it’s important to make sure it’s the right choice for you. It is always advisable to speak with a professional, such as a mortgage broker Coquitlam, who can help you understand the benefits and drawbacks of a reverse mortgage and help you determine if it’s the right choice for you.
