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Pros and Cons of Reverse Mortgages

By signing onto the loan the non-borrowing spouse protects his or her right to continue to live in the mortgaged home.One of my recent closings involved a couple I’ll call the Johnsons. Herb, aged 69, and Margaret, aged 67, first contacted me two years ago. At that time, the balance of borrowed funds is due and payable, all additional equity in the property belongs to the owners or their beneficiaries. After the 10 years is up, the rate then adjusts each year for the remainder of the loan.

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You can select between a monthly income check for lifetime, a credit line, combination, and or a one-time lump sum. If there’s a servicing fee, it’s typically between $25-$35. If the reverse mortgage loan has an interest rate that adjusts every year, the fee may be no greater than $30. There are both pros and cons, benefits and disadvantages to reverse mortgages.┬áIf the rate adjusts every month, the cap is set at $35. Allowing borrowers to spend down the equity in their home before they tap into their existing cash assets. The lender is also responsible for certifying the borrower’s occupancy status, issuing account statements and discharging the mortgage.

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