One of the best options for seniors who need to make the most of the equity in their homes is a reverse mortgage. The distinguishing element of this loan is that there are no monthly repayments required. You will, however, still pay homeowner’s insurance, home maintenance costs, and property taxes.
When evaluating a program for reverse mortgage, it is prudent to consider your repayment options. Though the loan is repaid in full when due, there are various options for doing it.
Here are the three repayment options for reverse mortgages.
Selling Your Home
This is the most prevalent repayment method for reverse mortgages. In this option, you sell your home and use the proceeds to repay the loan. If you sell your home for more than your loan’s balance, you keep the extra cash. If, however, the home’s value is less than the loan’s balance, you aren’t required to pay off the deficit.
Refinancing Your Mortgage into a Conventional One
If your heirs want to keep the house, they can refinance your reverse mortgage into a conventional one. They can also buy the home in cash. In case your heirs choose to buy your home in cash, they will only forfeit 95 percent of the lesser amount between its appraised value and loan balance.
Signing the Deed to Your Lender
If you or your heirs want to avoid the trouble of selling a home or owning it, you can sign the deed to your lender. This essentially pays off your entire loan, even as it might be less than the loan’s balance.
From the above options, you are sure to find one that fits your situation. A reverse mortgage typically becomes due if the home ceases to be your primary residence for more than a year or you choose to sell it. This type of mortgage, when wielded wisely, will be a flexible and powerful financial tool.