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6 Things to Know About Reverse Mortgages

By    |   Monday, 21 May 2018 11:02 AM

Reverse mortgages are loans, but they differ from other types in that the borrower doesn’t have to pay back the lender immediately. The loans are available to homeowners ages 62 or older, and payment isn’t due until they move from the home or die.

The many TV and radio ads about reverse mortgages may confuse people interested in the loans, according to a 2015 study by the Consumer Financial Protection Bureau. Some borrowers have even lost their homes because they didn’t understand how the program works, CBS News reported.

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The loans can provide great financial relief if you know these six things about reverse mortgages:

1. Loans are paid off through the estate or from the sale of the home — The Federal Housing Authority (FHA) manages reverse mortgages through its Home Equity Conversion Mortgage (HECM) program. Lenders are insured by the FHA to recover full investment incase the home’s value is less than the loan balance when sold.

2. The home must be the primary residence — Borrowers must own the home or have a low mortgage balance and have the financial resources to pay property taxes and insurance.

3. Various homes are eligible — Loans are available for single-family homes or two-to-four-unit homes with a unit occupied by the borrower. Condominiums and manufactured homes are also eligible if approved by the Department of Housing and Urban Development (HUD).

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4. Your estate will not be passed on to heirs — The loan must be repaid if the home is sold or the borrower dies. However, if there is any remaining equity from loan, interest, or finance charges, it can be transferred to heirs.

5. There are fees for the loan — These include closing costs as well as appraisal and origination fees, much like refinancing a home, according to HGTV. Borrowers must also pay for mortgage insurance along with the home’s taxes and insurance.

6. Both spouses should have the house in their name — If only one spouse legally owns the home and dies, the other spouse would now have to repay the loan and could lose the home if not financially able to.

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Reverse mortgages are loans, but they differ from other types in that the borrower doesn’t have to pay back the lender immediately.
reverse mortgages, things, know
Monday, 21 May 2018 11:02 AM
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