Home Equity Loan is also called a Second Mortgage Loan. It bases on tha fact that some portion of the house has already been paid for and you can borrow against the equity.

Owing to this form of loan you are going to get a particular, reapayable amount of money over a fixed period. The payment schedule usually calls for equal payments that will pay off the entire loan within that time. You can also take into consideration a traditional second mortgage loan instead of a home equity line .

The disclosing lenders

Lenders required by the Truth in Lending Act to disclose the important terms and costs of their home equity plans (the APR, various charges, the payment terms, and information about any variable rate feature). In the reality, the lender doesn’t charge a fee until after you have been told that. You are bound to acquire these disclosures when you are given an application form, and you will get additional disclosures before the plan starts existing. In case any term has changed before the plan is opened, the lender is obliged to give back all fees if you decide not to enter into the plan because of the changed term.
You are allowed to cancel the credit line. This right allows you to withdraw for any reason . All you have to do is to inform the creditor in writing within the three-day period. The creditor has to cancel the security interest in your home and return all fees.

Things you should know about the Reverse Mortgages

A reverse mortgage permits you to change the equity in your home into a lump-sum payment, monthly income, or a line of credit.
But what for? The answer is clear ! It is a strategy in retirement (you must be at least 62 years age to qualify for such a mortgage) if you want some extra income. People call it It's "reverse" because it reverses the direction of the payments.
Until you no longer occupy the home as your primary residence, no payments are made on the loan . If you decide to move or sell your home, the loan balance is due and payable..

Requirements for a reverse mortgage

• You and all co-borrowers must be at least 62
• The home should have a very low mortgage balance or be owned free and clear.
• The home must be occupied by the owner.

Determination of your equity

The allowable equity is based on three factors:

1. The youngest borrower's age
2. The appraised value of your home
3. The FHA maximum loan limit for your county

The involved fees

There are following fees you will have to pay:

• origination fee
• appraisal fee
• title fee
• escrow fee
• recording fee
• a monthly servicing fee.

These fees can be included in your loan balance, providibg there is enough equity available.

The loan balance excess

If the loan balance exceeds the value of your home,you have to occupy the property, and take responsibility for maintenance and payment of taxes and insurance. As long as you abide by the loan agreement, nobody can force you to sell or vacate your home. FHA insurance guarantees against any loss to the lender.
OK, but your home needs repairing!
With the reverse mortgage, repairs can be paid for out of the available equity .You can have it repaired even if your loan has closed and funded.

In what ways will this affect your heirs?

If you die, the loan balance becomes due and payable. The loan might be rapayed by your heirs by selling your home, or refinance the reverse mortgage and keep the home. If your home has appreciated in value, you are obliged to pay back just the outstanding balance. The amount of money that remains after the mortgage will go to your heirs.

What about your Social Security income?

Reverse mortgage loan funds do not have any influence on your Social Security or Medicare benefits. However, Social Security income benefits have some limits, and your cash payments must be structured to follow those guidelines. Moreover, Medicaid, Aid to Families with Dependent Children (AFDC), and food stamps all have different eligibility .It is advisable to u contact your local agency on aging, or these agencies' respective offices, for further information.