No More Mistakes With Reverse Mortgage!

Before we discuss the various attributes of reverse mortgage, you must understand that there hardly any loan without a downside. This is a type of loan that can provide elders with much needed consistent source of income after retirement. All loans including this one are taken to make the most out of any financial situation. Here is the thing; you can cut the downside if you choose your reverse mortgage California very carefully. This blog post will discuss some of the common misconceptions people have about this loan.

Pay Attention During Counseling

Frist of all you should know that there are a whole lot of rules and regulations laid down by U. S. Federal Housing Association (FHA) to protect borrowers. Since reverse mortgage is offered to only senior citizens (applicant must be minimum 62 years old), the federal government has made it mandatory that the applicants must go through a counseling before applying for loan. There are plenty of nonprofit counseling centers one can approach. The lender itself will provide the list. Many senior citizens take these counseling sessions lightly and later complain about the bad deal they got. This is your first step towards avoiding any mistakes.

Your Souse Is A Co-borrower

The amended rules also state that any lender should and must sign applicant’s spouse as a co-borrower even if she/ he is not 62 years old at the time of the application. This rule will effectively allow your spouse to live in the same house even after your death while the reverse mortgage still continues. Make sure that your lender complies with this rule. 

  

Calculate How Much You Can Borrow

Before moving forward with your application you must check how much you can borrow. In fact your lender should provide you with detailed quote describing how much money you can receive and in how many installments. Most of the lenders have online reverse mortgage calculator that can be used to calculate loan amount. However this method is not quite accurate, you should ask the borrower for a fair estimate anyway. FHA has also placed restriction on how much of your loan can be disbursed in first installment, limited to no more than 60 percent of whatever the homeowner is allowed to borrow

Reverse Mortgage Interest Rates

California's Reverse Mortgage Elder Protection Act of 2009 states that a reverse mortgage interest rates can be either fixed or variable. Fixed interest rates will remain same throughout the loan tenure. This means if inflation goes up you might pay less than average market rate saving money while it goes down you will pay more than average market rate. On the other hand variable reverse mortgage interest rates will change as per the market conditions. You should choose the type depending on your requirements and as discussed during counseling sessions.

Closing Cost & Origination Fees

Both Closing Cost & Origination Fees can be significantly higher than conventional loans, plus you need to pay them up front. If you don’t have the cash these will be added to the reverse mortgage amount with interest. You can bargain with your lender about these but still these costs are higher.

Property Tax, Insurance etc.

Your property needs to be in perfect order both physically and financially. Even though you can get reverse mortgageCalifornia, you still have to pay property tax, home insurance, flood insurance etc. by yourself. You should check it with the counselors as to which expenses should be borne by the borrower. The point is you cannot use you loan money to pay any of these bills. However you can pay back your existing home mortgage with this loan amount. And yes, keep your property out of any legal warfare as long as possible. Reverse mortgage lenders particularly don’t like disputed properties.

Work With Licensed Lender

Although last, this is the most important point. You must work with only a licensed and insured lender with good reputation. This is very important since all the FHA rules, regulations and concessions are applicable to only licensed and insured reverse mortgage lenders. If you keep these points in mind, you should do just fine. A little homework is the key to a comfortable and happy retired life.