A great reverse mortgage counselor explains how to get the most from home equity in retirement. Learn to protect personal assets and lower taxes.
The U.S. Department of Housing and Urban Development approves reverse mortgage counselor programs that provide information about home equity loans. In some situations, counseling is mandatory. In all situations, counseling is practical. Everyone who considers borrowing against home equity should fully understand the process and all costs involved.
Reverse Mortgage Counselor Questions
A reverse mortgage counselor must remain neutral and unbiased to provide valuable assistance. For this reason, the federal government becomes involved in the certification process. In most situations, seniors and retirees are the primary customers who qualify for these types of home equity loans. Counseling courses should be designed to answers questions about retirement, the impact of borrowing against home equity, how interest accumulates, and how to repay principal.
Interest Charges
Interest begins accumulating on a reverse mortgage the day loan funding occurs. The original principal balance is determined by the application of funds. In most situations, all preexisting loans are paid in full and closing costs are disbursed. In addition, lenders typically establish a line of credit for future draws against home equity. Each month as interest compounds on the loan, all interest and principal are combined to form a new principal balance. Stated similarly, all interest rolls over into principal on a monthly basis without payment.
Repayment Obligation
Ask counselors about the loan repayment process. In a reverse mortgage, repayment is not required so long as one or both owners continue to occupy their residence on a continuous basis. When the last spouse vacates a home voluntarily or by death, the loan is due. Heirs may repay the loan balance and receive clear title or may choose to surrender the home without personal cost or liability of any kind.
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