Many of the retired persons in the country face serious financial troubles. For majority of the retired persons in the country, the main source of income is the Social Security income. However, as a retired person if you own a home as a primary residence, then you can take out a reverse mortgage loan which can supplement your social security income. If you are a senior citizen with age more than 62 and if you own a house as the primary residence, then you can take out a reverse mortgage loan. Unlike the other mortgage loans, here payments are made to you instead of you making the payment. Before taking out a reverse mortgage loan, you should have a clear understanding about this loan. Here we discuss about some essential things that you must be aware of.
1. Various payment options
In a reverse mortgage, payments are made to you. There are various payment options available before you. You can take the payment in equal monthly mode as long as you survive and stay in the house as the primary residence. You can take the amount as one time lump sum amount. You can also get the amount for a fixed term of years. Whatever be the payment option, there are not much restrictions on the use of reverse mortgage proceeds. You can use the proceeds for whatever purpose you want.
2. Only a part of your primary home equity is tapped
In a reverse mortgage loan, your entire home equity is not utilized to offer you the loan. The maximum reverse mortgage loan amount is calculated on the basis of the appraised value of the home, current mortgage rate and the age of the youngest borrower. While taking out a reverse mortgage loan, you also have to pay some costs which include loan origination fees, third party charges, mortgage insurance premiums etc.
3. There are chances of losing the house with reverse mortgage
Unless and until you meet the terms and conditions and stay in the house or do not die, you don’t have any fear of losing your house. While you take out a reverse mortgage loan, you are responsible for paying the property taxes, insurance and utility bills. In case you fail to stick to your responsibilities, lender has all the rights to take action against you. Your house may also be foreclosed by the lender.
4. Understand the terms
Reverse mortgage loan is a very good mortgage offer for the senior citizens in the country. But, it has its share of risks too. By taking out a reverse loan, you are actually putting your house at risk. Before taking out a such loan, you need to ensure that you understand all the terms and conditions associated with the loan. You need to shop around so as to get the best loan. If you are not confident of doing all these things on your own, you can take the help of an expert.
Understanding on all these above discussed things, will help you make an informed and right mortgage decision.