A home is usually the largest investment a person makes during their lifetime. The equity which builds up in the home as mortgage payments are made may be used to fund a person’s retirement through the use of reverse mortgages in Richmond. Many are confused as to what a reverse mortgage is and want to know more. Here are the basics of this type of mortgage and how it benefits seniors.
A reverse mortgage is actually a home loan, only in reverse. Instead of you making monthly payments to a lender, they make monthly payments to you, using the equity you have built up in your home. The cash received through Reverse Mortgages in Richmond is tax free and the borrower never has to pay the money back as long as he or she lives in the home and uses it as their primary residence. There is no income requirement for one who wants to make use of this program.
The money received goes against the equity in the home and interest is charged on this money, leaving less for one to leave to their heirs. Some people choose to purchase a life insurance policy to offset the money they receive from the reverse mortgage. One concern of many is that they will find they owe money at the end if the home declines in value. Mortgage lenders understood this when setting up the program and added a non-recourse clause, which prevents the homeowner and/or his or her heirs from being forced to pay more for the home than it is worth at the time of repayment. Not all lenders abide by this, however, so it’s your responsibility to read the fine print.
There are many conditions you must be aware of when making use of a reverse mortgage. The borrower must remain in the home. If he or she leaves, the money obtained must be repaid. In addition, if the home or any part of it is rented, the loan comes due and the same is true if any new debt is taken out on the property, the homeowner requests a change in zoning, or a new owner is added to the title. Many are more than happy to abide by these conditions and benefit from reverse mortgages. Others, however, find this isn’t the right solution for them. Only you can decide what path you should take.
