Interest on a reverse mortgage is surprisingly affordable and not paid as long as you stay in your home. Find out how to increase cash flow immediately for a better lifestyle.
A reverse mortgage works differently than conventional home loans. No payment is required while you live in your home and take care of necessities. In fact, you receive payments from a line of credit secured by home equity. Because of these fundamental differences, interest accrues in a slightly different way.
Interest Accrual
The first use of a reverse mortgage is to repay all outstanding home loans. Your new loan never requires payment above the market value of your home. This special loan is without recourse to your personal funds or assets. Because of this benefit, all existing recourse loans are paid. Loan payoffs, if any, become the original loan balance. Each month you accept a payment, the balance of the loan also increases by the same amount. Interest then accrues monthly on the new balance.
Reverse Mortgage Payoff
Payments are not required while you or your spouse remain in your home, subject to few exceptions. The exceptions relate to maintaining insurance, taxes, and property condition. When the last remaining spouse leaves, the loan is due and payable. You or your heirs may keep the home by paying the balance due, or surrender the home in complete satisfaction of all amounts owed. This is a unique feature of non-recourse loans.
Advantage of Non-Recourse
Non-recourse loans do not include personal liability. The home is the sole source of repayment required. Borrowers also retain the right to repay a reverse mortgage voluntarily at any time. This flexibility enables the homeowner to release the lien and take advantage of market increases, but is never personally liable for the loan balance if the market drops.
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