What you need to know about canceling a reverse mortgage
You may have considered applying for a reverse mortgage if you’re an elderly homeowner who needs extra cash to pay for medical bills, renovate your home, or even help support your lifestyle. This form of borrowing helps retirees and retirees to borrow against the equity in their homes.
Read on to learn more about how to cancel a reverse mortgage if you have any doubts.
What is a reverse mortgage?
A reverse mortgage is a way to borrow money using your home as collateral. You take the mortgage as a lump sum, a line of credit, a regular income stream, or a combination of the above options.
With this type of mortgage, you won’t have to worry about ongoing payments anymore. The repayment will only take place when you sell the house, move into senior care, or die. With a reverse mortgage, compound interest is added to the amount you owe. As a result, additional interest is calculated on the total amount you owe. Soon, you could end up owing a lot more than what you borrowed. This is why it is essential to understand all aspects of your reverse mortgage and how you can end it.
How Much Money Can You Get With A Reverse Mortgage?
The loan amount depends on your age, the value of your property and the lender. Under the Responsible Loan Principles of the National Consumer Credit Protection Act, eligible applicants can borrow up to a specified margin against the security of their home.
This can vary between 15 and 20 percent of the value of your home by the age of 60. As you get older, your borrowing capacity will also increase by 1 percent more per year. So at age 70 you can expect 25-30% and 80- around 35-40%.
How to cancel a reverse mortgage
If you change your mind and want to opt out of a reverse mortgage, you can do so during the cooling off period. This can vary between 10 and 30 days, depending on where you reside and the terms set by your lender. By ending your reverse mortgage agreement during this time, you can get reimbursed for your settlement fees, interest, and the standard cost of an appraisal. You will need to pay your independent legal fees or financial advice and government fees, if applicable.
However, if you are wondering how to terminate a reverse mortgage after the cool down period, you may need to consider paying off the entire loan balance. If you have a sizable amount to pay off and cannot arrange the funds, one option might be to sell the house and use the proceeds to pay off the reverse mortgage.
Another option you might want to explore is to refinance the reverse mortgage into a regular home loan. However, it can be tricky. Some people also ask their families for help if they cannot get a conventional loan.
Before going ahead with any of these options, it is important to consult with a loan expert or specialist, as reverse mortgages can be complex.