A senior reverse mortgage allows a homeowner to borrow money against the value of their home. Payments made in this agreement are deposited in the homeowners account on a monthly basis of a line of credit. Reverse mortgage assures a 50-80 percent return on the value of your home. Considering the depreciation factor, this is a very lucrative deal. However, to make the most out of the whole process, proper management of the resource is crucial.
Managing reverse mortgage
To effectively manage your senior reverse mortgage, a number of factors have to be considered first. This includes: The age of the borrower- reverse mortgages are allowed for persons over 62 years of age. This is to supplement their income, which may be non-existent. The older the borrower, the higher the payments made to their loans. However, the borrower may want to consider a younger spouse that they may have. Being sole borrowers, in the event the borrower dies, the younger spouse may not be able to pay off the amount and may be kicked out.
Costs: the borrower has to get the correct numbers in fees charged in the process. They may include MIP (mortgage insurance premium) as well as third-party charges. To effectively manage any monetary investment, understanding what amounts will be deducted is crucial. For most reverse mortgages, 1.25% MIP on the outstanding loan balance is charged on an annual basis. Third party charges such as appraisals, title searches, insurance, credit checks, inspections, and surveys may also be applicable. Other charges such as servicing fee and loan origination fees may also come into play. To get your money’s worth, the investor has to find a way to minimize on these costs where applicable without compromising or violating the agreement’s integrity. Counselling as A requirement to help borrowers better manage funds from reverse mortgage ventures, the government and lenders require borrows to undergo counseling. This counseling session is meant to explain to the borrower how exactly the reverse mortgage plan works and what to expect. This protects those who may not have the know-how of the financial process undertaken in the borrowing process. The average cost for counseling is estimated to be about $125. Keenness in these counseling sessions may very well make the difference in what move you will make next. However, if you are familiar with the whole process, you may find the shortest route to bypass this step. It is, however, worthy to note that proper counsel before taking a loan may make or break your loan management process.