Reverse mortgages are designed to allow elderly homeowners to stay in their residences while using the equity in their homes as income. Instead of making payments to a lender, the borrower receives payments from the lender. The borrower keeps the title and must keep up with taxes, maintenance, and repairs. There are two types of reverse mortgages: tenure reverse mortgages and term reverse mortgages. A borrower with a tenure reverse mortgage is given income as long as he or she continues to live on the property. A borrower with a term reverse mortgage receives income for a set period. The experienced real estate lawyers at Pulgini & Norton can help people in the Boston region explore their options and determine whether acquiring a tenure reverse mortgage may be a sound decision.
Exploring a Tenure Reverse MortgageGenerally, a term reverse mortgage is more risky than a tenure reverse mortgage for the borrower. This is because, at the end of a loan term in the former, the borrower usually has to sell the home and move. Lenders, however, find the tenure reverse mortgage is more risky because a mortgage debt grows over time, such that it may exceed the house's value if the borrower lives longer than expected. FHA-insured tenure reverse mortgages tend to be used more often. With an FHA-insured reverse mortgage, the risk of a borrower living past his or her expected lifespan is shifted to the federal government.
Different types of tenure reverse mortgage products are used in Massachusetts, giving the borrower flexibility in how to receive income. With a tenure reverse mortgage, the borrower only receives the income as long as he or she occupies the house. In some cases, the borrower can get a line of credit, which he or she can draw against as necessary. In other cases, he or she can receive a large up-front payment.
With an HECM mortgage, for example, the borrower can choose among five different payment options: monthly tenure payments, term payments, line of credit, modified tenure (combined with a line of credit), or modified term. In contrast, Cash Account Payment products may not offer an option of monthly payments. Instead, the only option is an open-end line of credit available for as long as the borrower lives in the house.
A borrower who uses an FHA-insured tenure reverse mortgage can sell the home or move at any time. When sales proceeds exceed the balance of the mortgage, the borrower can keep the excess. An advantage of the tenure reverse mortgage is that a borrower cannot be required to sell the home to pay off the mortgage, even if the balance exceeds the value of the property due to the borrower's longer life. When a loan comes due, the borrower or his or her heirs will still only owe the value of the property, even if the loan turns out to be greater than expected.
Explore Your Home Financing Options with a Boston LawyerThe Boston attorneys at Pulgini & Norton can provide knowledgeable advice on mortgages and other home financing options. We offer legal representation related to real estate matters in Newton, Lowell, Malden and other cities in Massachusetts. Call us at 781-843-2200 or contact us via our online form for a free consultation.