What is a reverse mortgage?
The reverse mortgage is a term used to describe access to your own capital in your home for cash. It is a financial tool available for seniors in the US, Canada and Europe. This type of rules for mortgage qualifications is based on the age of the homeowner and takes over the full property of the property.
Self capital is the difference between the market value of the property and the amount owed. This capital is usually realized when the property is sold and the funds are dispersed. Only at this point you have access to the money value of your own capital in your home.
A regular mortgage is a financial debt tool used by financial institutions to describe a loan for a long time based on the current value of asset or assets such as home or cottage. Once the mortgage is paid, homeowners own the title of their property
The reverse mortgage allows the house owner to access his own capital in their home and still in it, without a monthly mortgage. The installment of mortgages fromLoading, until the owner dies, the property is sold or the owner does not move. The amount due is deducted from the sale of the house before the estate is paid.
The reverse mortgage is suitable for people who retire or need another cash flow to meet their living costs but have no means to generate income. To qualify for a reverse mortgage, certain criteria must be met. The minimum age of the property owner must be 61 in the US, 60 in Canada, 50 in Europe and has no other mortgage on the property.
There are strict laws surrounding reverse mortgages to ensure that seniors are not cheated in access to the entire capital in their house and then be forced to move out. The reverse mortgage cannot be in the household for more than 40% of its own capital.
Payment is made to a person living in the house and the home is subject to inspectors to ensure that he is in goodé repair. Real estate insurance and real estate taxes must be up to date. Any outages may break the agreement and cause the bank to call into a mortgage.
Talk to the recipients of your will when you think about a reverse mortgage. The amount of their inheritance is reduced by the amount owed to the bank for the mortgage repayment, as well as the amount deducted from home.
may be able to provide additional financial arrangements that have a more favorable interest rate or tax treatment. Other options include a loan or renting a family; If the property is "sold" within the immediate family and the revenues provide the necessary funds.
When thinking about a reverse mortgage, ask for additional fees. In the US there is 2% of the value of insurance fees and there is a 2% initial fee that is deducted from the amount of mortgage payments. In Canada and Europe there are application fees, lawyer fees and bank fees. There are also clowns of mortgage costs that include titles search, registration of lien, etc.
Check any service or charges that are added to the reverse mortgage, including monthly account maintenance charges. The reverse mortgage usually has relatively high fees and service costs. Although these costs can be paid from the loan itself, the interest is calculated and pays off for these additional costs.
Interest rate on the reverse mortgage should be lower than the conventional mortgage, as it is completely supported by an asset, with a guaranteed payout. In the US, funds derived from a reverse mortgage are not considered to be income for tax purposes. However, the interest costs of the mortgage repayment cannot be deducted until the house is sold, which is the moment when the actual interest payment is calculated and deducted from the value of the house.