With the growing popularity of reverse mortgages, more and more seniors find themselves asking, “How does a reverse mortgage work?” This is understandable because reverse mortgage loans offer many benefits and protections to borrowers. In a nutshell, a reverse mortgage loan works by converting some of the home equity of a borrower into cash. The borrower continues to live in the home, and does not lose ownership over it. The borrower also does not have to worry about monthly payments. Instead, he or she only needs to take care of relevant taxes, insurance, and maintenance expenses on the home. Payment of the loan is made once the borrower (or all the borrowers) move from or are no longer living in the home.
For more information on the question, “How does a reverse mortgage work?”, please get in touch with us. You can give us a call at 800-791-5626, or we can be reached through email via our online contact form. Our professionals would be happy to answer all your reverse mortgage loan inquiries.
How Does a Reverse Mortgage Benefit the Borrower?
Aside from the lack of monthly payments required on the part of the borrower, here are some of the other answers to the question, “How does a reverse mortgage benefit a borrower?”:
- Loan proceeds can be received in a number of ways, such as in a lump sum, through monthly payments, as a line of credit, or some hybrid of these. This is useful because the payment method can be tailored to the needs of the borrower. For instance, if the borrower intends to apply the loan funds to one large purchase or expense, a lump sum payment may be the best way to go about it. However, if the borrower is looking for more of a steady stream of income, then regular payments may be a more appropriate method. This is one example of the helpful flexibility of reverse mortgage solutions.
- Funds received from a reverse mortgage loan are tax-free (please consult your tax advisor).
- There is no penalty for pre-payment. This means that, if the borrower wishes to retire the loan by paying it off ahead of time, there will be no additional fee or cost for doing so. This is not always the case for other types of loans.
How Does a Reverse Mortgage Protect the Borrower?
Regarding the question, “How does a reverse mortgage protect the borrower?”, there are a number of key protections to highlight.
- Reverse mortgage loans fall under the category of non-recourse loans. This puts a cap on the amount owed by the borrower, so that he or she will never have to pay more than the value of the property.
- The U.S. Department of Housing and Urban Development has made it a requirement for borrowers to be assessed more thoroughly, as part of the reverse mortgage loan process. This helps to ensure that borrowers are matched to loan products that are appropriate for their financial conditions.
- There is also an additional requirement for counseling by an independent third party. This is helpful because borrowers are better able to understand what a reverse mortgage loan entails, what is expected of them, and how it may affect their finances. All of this information is good to have because it can lead to better decision-making.
Learn More Information on How Reverse Mortgages Work
For more information regarding the question, “How does a reverse mortgage work?”, feel free to give us a call at 800-791-5626 or send us an email via online form. Our employees have a great deal of experience in the field of reverse mortgage loan services for seniors, so they will have no problem answering your questions such as “How does a reverse mortgage work?” completely and clearly.