Here are the Basics of Mortgages and Reverse Mortgages
Mortgages come in various types. If you want to know what is best for you, then you have to understand the basic facts about different mortgages. This way, you will understand their benefits and disadvantages.
The Basics of Mortgages
So, what really is a mortgage? This is a type of loan that you that you have to repay over an agreed time frame. Normally, a mortgage is secured by a property such as your home. If you have a mortgage, you are securing a promise that the amount you borrowed from the lender will be repaid in full. For the majority of consumers, getting a mortgage is one of the biggest and most serious financial decisions that they have to make.
There are many lenders that can offer mortgage loans. Banks, for example, are the number one originators of mortgages. You can also get a mortgage from special mortgage lenders, building societies, or you can seek the intervention of a mortgage broker. You can get a mortgage after finding the crucial information you need. It is also possible to get the advice of a financial advisor who will give you recommendations on what type of mortgage would be best for your situation.
In general, there are two principal ways to pay your mortgage. These are the full repayment plan and the interest-only mortgage. With full repayment, you will promise to pay back the loan and the interest for an agreed period. For example, you may negotiate for a 30-year repayment plan with a fixed interest rate.
The other mode of repayment is interest-only. As the name implies, this plan allows you to pay only the interest of the loan for a fixed period. However, you need to build savings or put your money in an investment plan so that you can repay the whole loan when your mortgage becomes due.
Understanding Reverse Mortgage
Reverse mortgages are getting a lot of attention these days. Unlike conventional mortgage, borrowers will not pay anything if they get a reverse mortgage. Instead, the borrower gets a monthly payment or a lump sum from the lender. The funds are actually taken from the home equity that you have built over time.
A reverse mortgage loan is not taxable. This special feature makes reverse mortgage loan extremely attractive. The loan does not affect your Medicare and Social Security benefits. And most important of all, you will retain ownership of the house as long as you are residing in it.
A reverse mortgage will become due once the last borrower passes away. If you no longer live in the house or the property has been sold, then the loan is also up for repayment. You can apply for a reverse mortgage if you are at least 62 years old. Up to three seniors can apply for a reverse mortgage as long as they meet the requirements.
If you want to have a regular source of income, then a reverse mortgage is good for you. This loan is best for senior citizens. If you get an approval, you will receive a lump sum or regular monthly payments from the lender.
Here are the Basics of Mortgages and Reverse Mortgages
By: Rob Blake
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