Facts About Reverse Mortgages
It is through reverse mortgage that people that are 62 yrs. old and above can convert the equity of their house into cash. Understanding reverse mortgage and its ramifications are very important before an individual decides to get one. It is in this article that we will be discussing the things that are related to reverse mortgage.
If you are going to have a normal home loan, the thing that you will have to do is to pay the principal amount as well as the interest. In a normal house loan, as you are paying your monthly dues, your borrowed amount will go down while the equity if your house will go up. Everything is opposite when it comes to reverse mortgage. It is in a reverse mortgage that you can turn the equity of your house into cash. Monthly payments will not be paid by you. There are different ways for the cash to be paid to you. It can be in a single lump sum payment. If you wish, you can get your cash on a monthly basis. Or you can put it on a credit line account.
It is in reverse mortgage that the owner of the house still owns the property while also getting the cash that they need. The system in a reverse mortgage is that the equity of the house will go down while the loan amount will go up. The total equity of the house cannot be more than the reverse mortgage that was approved. The one that loaned the cash can’t seek any payment other than the value of the house. Your other assets including the assets of your house are protected by what is called as a non-recourse limit.
The principal amount including the interest should be paid. If the owner of the property dies, sells the house, or moved to a new home, then he has to pay the loan. If none of these instances happened, then the lender will not be obliged to pay the loaned amount.
There can also be other factors that they will require the lender to pay their loan. The first factor is that is the lender has failed to pay their property tax. The next factor is that if the lender fails to maintain and repair their home. If the lender failed to ensure their house, then they will have to pay the loan. If there is a declaration of bankruptcy, then you will have to pay the loan too. The loaned amount also have to be paid if you abandoned the property. If there is fraud and misrepresentation, then you will be required to pay the loan.
A home equity loan is different from reverse mortgage. They are different ways of obtaining money from the equity if your home. The interest of the total amount of your loan needs to be paid monthly in a home equity loan.