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Several financial experts would market reverse mortgages as one of the best solutions for every senior's financial problem and even one of the best ways to enjoy their retirement years. However, reverse home mortgages can be quite difficult to grasp. There are interests and fees that can use up an enormous amount of a borrower's home equity. Here are some ways to solve your financial concerns without tapping into your home’s equity regardless of your personal situation.
1. Your loan becomes overdue if in case you pass away with an existing reverse home mortgage. To pay off your mortgage, the bank that you got it from will become the owner of your house by filing a foreclosure. They will then sell your house so to get back the amount that they paid for your house. So the difference will then go to your heirs if the real estate property sells for more than the remaining balance on your home mortgage. However, if the house sells for less, then your heirs will receive nothing. The FHA insurance will then cover any of the lender's potential financial loss. That's why most borrowers are advised to pay for mortgage insurance on reverse home mortgages.
2. If you live with a spouse or significant other and have an existing reverse mortgage, if you pass away, then the person that you're living with would have to move out. One of the main conditions of a reverse home mortgage is that the borrower would have to live in the house where you got the loan from and use it as is the primary residence. However, if the borrower dies, then the bank will have the authority to sell the property once the loan becomes delinquent. This will put the person who's living with you in jeopardy if he or she isn't 62 years old because he or she wouldn't be able to become a borrower on the reverse home mortgage.
3. Some seniors would often tap into their home equity to pay for their expensive medical bills. However, in this case, applying for a reverse home mortgage may not be a good idea. A reverse home loan would only put your house in peril. In addition, borrowers are mandated to stay in the house until the loan is cleared. And if you can't pay the reverse loan, then the lender or the bank will have the rights to foreclose on your home and then sell it to get the money that they invested.
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