What is a Reverse Mortgage
Reverse Mortgage Information
What is a reverse mortgage? Offered by banks and various other financial institutions, a reverse mortgage is another type of mortgage loan available only to elderly Americans. With a reverse mortgage, you can convert the equity you hold into homes into cash. This is one way to secure your retirement, and is a way to obtain a steady cash flow from your home.
In a reverse mortgage, mortgage payments are reversed. You would usually make regular monthly payments to the lender in a normal mortgage, but in a reverse mortgage, the lender makes regular monthly payments to you – depending on the amount of equity you have.
There are no restrictions on the use of the money from the reverse mortgage – it can be used for any purpose, just like credit from a normal bank loan.
Benefits to what is reverse mortgage? Loan payments are only due when you no longer live in your home – when you pass away or sell the home.
What determines the size of the monthly payments?
The main determining factors include the applicant’s age, value of the home, amount of present equity, current interest rates and the type of reverse mortgage chosen. The more elderly you are and the more valuable your property, the larger the monthly payments.
Who qualifies for a reverse mortgage?
In America, you must be at least 62 years old and you must own your property. This is a way to pay off another mortgage you might have, and clear any other debts you may still incur.
Reverse Mortgage Information: Payment options
Most borrowers would chose to obtain a line of credit, which allows you to make use of the loan at any time. The other modes of payment include a lump sum payment and fixed monthly payments. You should decide on the payment option depending on your personal needs, but the most flexible payment option is the line of credit. Avoid lump sum payments if you are afraid you might not be able to budget your finances carefully.
For more on what is a reverse mortgage and the different types of reverse mortgages available – FHA Reverse Mortgage, lender insured reverse mortgage and uninsured reverse mortgage.