How Does A Reverse Mortgage Work?

In California, seniors who are at least sixty-two years of age and own their own home can benefit greatly from a reverse mortgage. These mortgage plans allow the senior to stop payments on their loan associated with reverse mortgage lending the purchase of their primary residence. This could provide him or her with an effective way to enjoy their retirement years without worry. Any seniors who are interested in learning more about a reverse mortgage can contact Security 1 Lending.

How Does a Reverse Mortgage Work?

A lender evaluates the amount of equity the senior has accumulated over the course of paying off their residential mortgage loan. The equity is the amount of money paid into the settlement of a mortgage. With each payment made on a residential property, the homeowner acquires equity. When the equity is valued at a higher amount that the remaining balance of the mortgage, he or she may qualify for a reverse mortgage plan.

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The lender who approves the plan for the senior can distribute these funds in any way preferred by the senior. He or she can receive a lump sum for the total value of the equity accumulated or they can receive monthly payments. The senior is not required to borrow the full amount of the accumulated equity. They can choose a smaller amount or acquire a line of credit based on the value distributed.

The funds disbursed to the senior through the reverse mortgage plan are tax-free. The stipulations of the plan, however, implies that they are required to continue to live in the property. If the Seniors choose to sell the property are responsible for tax implications associated with this loan product.

What Should You Know About These Plans

As a reverse mortgage lender will explain, the senior retains full ownership of the property as long as they live there. They are responsible for repaying the reverse mortgage back to the lender when he or she chooses to leave the property. If they relocate to a retirement community or are placed within a nursing facility, the lender can sell the property to acquire the equity payments disburse to the senior if a default occurs. Alternately, they can set up a repayment plan or have a loved one make these payments on their behalf.

Declining market values do not affect the amount of the reverse mortgage. The seniors are not required to pay back more than he or she borrowed. The federal government has imposed strict guidelines to prevent predatory loan practices that could heighten the value of the mortgage product over time.

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