Pembroke Pines Reverse MortgageIf you are looking into Pembroke Pines reverse mortgage, there are some important things you should be aware of. We cover these facts in this article.

You have probably already seen the commercials where older adults are told that they can use a reverse mortgage to access their home’s equity and live a more financially dependent lifestyle. The ads then go on to say how a reverse mortgage will negate the need to make monthly mortgage payments and instead that money will be freed up for other uses.
Sounds straight forward, right?

Reverse mortgages are special kinds of loans that target people who are not less than 62 years old and makes it possible to borrow money based on the value of your homes. Unlike other kinds of loans, borrowers do not have to pay back the debt immediately.

What distinguishes reverse mortgages from other types of mortgages, is that with a reverse mortgage, the borrower does not have to pay it back immediately. Instead, payment of the mortgage is deferred until the borrower passes away or moves out of their home.
The lender recoups their money if the borrower’s heirs decides to pay back the loan in the event of the borrower’s demise or through sale of the home.

Even though the government does not provide the loans, the Federal Housing Authority is in charge of the Home Equity Conversion Mortgage (another name for a reverse mortgage).
By insuring the reverse mortgage, the FHA ensures that the lenders recoup their entire investment, even if the home is sold for less money than its current value.

When used in a comprehensive financial plan for borrowers, reverse mortgages have proven to be useful. It is recommended that a reverse mortgage makes up part of the borrower’s financial strategy but not all of it.

Before deciding on a reverse mortgage, you should consider several factors and what impact a reverse mortgage will have on them. Those factors are:

  • Health requirements
  • Financial strategy
  • Estate wishes
  • Financial security

If the consequences of a reverse mortgage on the above mentioned factors are acceptable, then the borrower can proceed with taking a reverse mortgage.

How Does a Reverse Mortgage Works?

Benefits of A Reverse MortgageThe amount of money a borrower gains access to is determined by the value of the home. Other factors include the amount of mortgage that a borrower still owes on the home, borrower’s age, as well as loans owed on other homes.

A borrower is likely to get more cash if they have gone on in years. You need to know though that in the case of a couple, the loan disbursed is determined by the age of the youngest of the spouse.

Borrowers have a variety of options on how they can access the loan, that is, they can choose to get the loan as:

  • A line of credit
  • Monthly payment
  • Lump sum

There’s a misconception that when a borrower takes out a reverse mortgage, it means that the lender owns the home, but that is not accurate. In the event of a sale, the bank has the first claim on any proceeds however, the borrower is considered to be the homeowner. Click here to read more about the pros and cons of a Pembroke Pines Reverse Mortgage.

There are some few restrictions thought that apply to that ownership such as:

  • A reverse mortgage is an owner occupied loan, which means that the borrower has to occupy the home. The home cannot be leased out to a third party.
  • There are several reasons why a borrower might consider taking a reverse mortgage including paying off their mortgage, eliminating their monthly installments, as well as getting rid of other debts such as home equity loans.
  • Some borrowers use a reverse mortgage as a line of credit to help them with unexpected expenses instead of having to sell off assets and stocks to cater for the costs.
  • The number of reverse mortgage applications had been steadily rising before the Great Recession, after which there was a sharp drop. Since then, reverse mortgages have regained their popularity.
  • Because borrowers are not expected to make any monthly payments, the interest is ever building up, which means that the amount of debt increases over the life of the loan.
  • It is important to note that even though homeowners are not expected to make monthly mortgage payments, they are required to make monthly insurance payments as well as other payments such as homeowners association fees, taxes, homeowners insurance, and the costs of homeownership.

Failure to meet these expenses can be catastrophic; leading to default and the immediate repayment on a reverse mortgage.
If you would like to better understand how a Pembroke Pines reverse mortgage works and how it can be of benefit to you, do not hesitate to get in touch Kloze.
You will greatly benefit from our many years of experience as well as our unbeatable rates.