REVERSE MORTGAGE SERVICES – PRAFTON FINANCE
A reverse mortgage is a special type of loan that allows you to borrow against the equity that you’ve built up in your home. You can put the money towards anything you like, from paying medical bills to making home improvements. Unlike a traditional home equity loan, a reverse mortgage doesn’t need to be paid back immediately, perhaps not even during your lifetime. That means no monthly checks to write to your lender.
Sounds simple, right?
Reverse mortgages are loans available to homeowners age 62 and older than allow them to borrow money based on the value of their homes. Unlike other kinds of loans, borrowers don’t have to pay back the debt immediately, instead deferring payment until they move out of the home or pass away – in which case the payment will be taken from their estate or sale of the home.
A reverse mortgage is a long-term solution to your financial needs. You will use the equity you have built up in your home to gain access to either a one-time advance or recurring advances of cash. A reverse mortgage works by offering a safe solution to access your home equity and turn into tax-free cash without the requirement of monthly mortgage payments. Unlike a traditional mortgage, with the reverse mortgage, you will not need to make any principal or interest payments until you and your spouse leave the home. You don’t need to make any payments on a reverse mortgage until the loan is due. This is usually when you move out of your home, sell it or the last borrows dies. You will owe more interest on a reverse mortgage the longer you go without making payments. This may result in you having less equity in your home. You may be able to borrow up to a certain percentage of the current value of your home. The maximum amount you will be able to borrow will depend on your age, your home’s appraised value, and your lender.
“The biggest advantage with the reverse mortgage is that you do not have to make any regular mortgage payments for as long as you or your spouse lives in your home, that’s what has made a reverse mortgage such a popular solution in all the countries”
REVERSE MORTGAGE PAYOUT OPTIONS
Reverse mortgage borrowers can select how frequently they receive their proceeds. Depending on the type of reverse mortgage you choose, you can get funds in a lump sum, fixed monthly installments, or through a line of credit. The older the borrower is, the more of your equity they can access, which makes reverse mortgages popular among older retirees.
- Lump-sum payments: Lump-sum payments are received all at once in a single disbursement. Most commonly, lump-sum amounts are used to purchase reverse mortgages.
- Fixed monthly payments: Fixed monthly payments are disbursed regularly each month. If you opt into fixed monthly payments, you can select from term or tenure payments. Term payments are received over a specific amount of time, typically between five and 10 years. Tenure payments are received as long as the borrower resides in the home as their primary residence.
- Lines of credit: A line of credit lets borrowers access funds as needed. The line of credit grows over time, but borrowers do not earn interest.
How do reverse mortgage work?
When you have a regular mortgage, you pay the lender every month to buy your home over time. In a reverse mortgage, you get a loan in which the lender pays out. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. The money you get usually is tax-free. Generally, you don’t have to pay back the money for as long as you live in your home. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Sometimes that means selling the home to get money to repay the loan.
COST TO GET A REVERSE MORTGAGE
Costs associated with a reverse mortgage may include:
-Higher interest rate than for a traditional mortgage.
-a home appraisal fee.
-a setup fee.
-a prepayment penalty if you pay off your reverse mortgage before it is due
-legal fees for closing costs or independent legal advice.
BENEFITS OF REVERSE MORTGAGE SERVICE:
- You receive the money tax-free: It is not added to your taxable income so it doesn’t affect your security & government benefits you may receive.
- You can use the money any way you wish: Maybe you want to enjoy your retirement or cover unexpected expenses. Perhaps you want to update your home or help your family without depleting your current savings. The only condition is that any outstanding loans like any existing mortgage or home equity line of credit.
- No regular mortgage payments are required while you or your spouse live in your home: The full amount only becomes due when you and your spouse no longer live in the home.
- You maintain ownership & control of your home: You will never be asked to sell or move to repay your reverse mortgage. All that’s required is that you maintain your property and stay up-to-date with property taxes, fire insurance, and condominium or maintenance fees while you live there.
- You keep all the equity remaining in your home: In many years of experience, 99 out of 100 homeowners have money left over when their reverse mortgage is repaid. In most cases, clients have lots of equity left over when they decide to sell their home.
Just the way you like it –
Eventually, you’ll owe more than you borrowed, since interest is being added to your balance. But a reverse mortgage allows you to choose how you receive your money. Do you want it all at once or perhaps spread over time? It’s up to you. Also, if you’d like to pay back the interest and principle entirely, pay the interest month-to-month or on an annual basis, that’s your decision, too.
-The loan has higher interest rates;
-Equity decreases as interest accumulates;
-Of course, a reverse mortgage will cut back on the amount you intended to leave your beneficiaries;
-There are other costs associated with the reverse mortgage, such as a home appraisal, application of closing fees, costs for legal advice and a penalty for selling or moving within three years of getting the mortgage.