Most people want mortgage refinancing leave a legacy in some form for their kids. When it comes to the reverse mortgage most are concerned about how much of the home's equity will be left over after they pass away.
To recap how a reverse mortgage works, the reverse is a true negative equity mortgage. It allows a borrower to borrow anywhere from 45% to 75% of the value of the home and use that money for whatever the borrower chooses. There is no monthly, scheduled payment or scheduled end to the mortgage. If the borrower wishes to live in the home for life and never mortgage refinancing a payment to the lender he may do so.
However, upon death the borrower's heirs will be expected to pay back the lender. To do this the heirs generally sell the house and the proceeds are used to pay back the bank. That's why lenders only lender 45 to 75 percent of the value. They want to make sure there is plenty of equity to do this.
Nevertheless, borrowers still want to leave as much to their kids as possible. There are two things a borrower can do to make this happen.
The borrower first should be smart about negotiating with the lender. The lender, be it direct or a broker will include a monthly servicing fee. This fee is anywhere from 25 to 35 dollars monthly. This is the main way mortgage companies make money. The lender will never tell you up front that a 25 dollar fee is available.
Always ask for it. This does two things: First, it slows down the rate at which the reverse mortgage eats into your equity, and second, it gets the borrower more available moneys for the mortgage up front.
The second big decision a borrower can make is to opt for a line of credit rather than taking one large lump sum. By opting for a line of credit and using moneys on an "as needed" basis the reverse mortgage negative equity feature eats into the home's equity as slowly as possible. Reverse mortgages only accrue interest on dollars used. So, while the borrower has money sitting in the line of credit it is not accruing interest against the home. Conversely, taking a large lump sum starts running the juice immediately.
Tips to make the reverse a stronger financial tool...
Get a 12 page reverse mortgage guide to answer your questions. This reverse mortgage answer spot has tons of articles and 20 of the top questions and answers.
ไม่มีความคิดเห็น:
แสดงความคิดเห็น