If you are a retiree with a limited income, a reverse mortgage is one loan that you can choose to opt into. A reverse mortgage allows homeowners to convert part of their home’s equity into cash. This type of loan was made to help retired homeowners have the chance to cover their utilities, healthcare, and other basic monthly living expenses even with their relatively small income.
Requirements and Responsibilities of a Borrower in Reverse Mortgage Transactions
This type of loan is called reverse mortgage because unlike traditional types of mortgage, the lender makes payments to the borrowers, and not the other way around. As long as the homeowners live in their home, they will not be required to pay back the loan.
However, getting this type of loan arrangement is not as easy as it seems to be. There are a couple of requirements and responsibilities that the borrowers must fulfill in order for their reverse mortgage arrangement to be successful.
Here are some of the reminders that homeowners must take into consideration:
- Age Requirement
The homeowners listed on the title need to be 62 years or older. If one spouse is aged under 62, further evaluation and additional information are needed to determine reverse mortgage eligibility. The age of the borrower can affect the amount of loan you can get. The older the borrower, the larger they can get.
However, you must be careful if you plan to exclude a younger spouse in the title for a higher payout. If the older borrower dies, the younger spouse would need to move out of their property immediately.
- Occupancy Requirements
Not all properties can be submitted for reverse mortgage. You can only submit your property as a collateral if it is your primary residence. For example, investor properties and vacation homes do not qualify as collateral for reverse mortgage. If you submit any of these as collateral, your application will most likely be denied.
- Taxes, Insurance, and Upkeep
It is the borrower’s’ responsibility to take care of mandatory obligations like homeowners’ insurance, real estate taxes, and even condominium fees. The borrowers also need to ensure that their property is maintained regularly. They will shoulder any upgrades, repairs, or reconstruction jobs that they contract for their home.
These are just some of the various requirements and responsibilities that borrowers are required to keep up with if they want to have their property reverse mortgaged. If you become successful with this type of loan, you will be able to get your money via lump sum, through period payments, through a line of credit, or even a combination of all of those.
To Know More, Seek the Assistance of a Reliable Real Estate Lawyer
The process of reverse mortgage can be complicated, especially if you have no prior experience with this kind of arrangement. There are various reverse mortgage types that you can choose from, like the Home Equity Conversion Mortgage, Single-Purpose Reverse Mortgage, or other proprietary reverse mortgages. To help you understand the intricacies of each deal, it is advisable for you to approach an experienced real estate lawyer around your area.
Written by The VanMatre Law Firm, one of the top real estate attorneys in Columbia, MO.