How A Reverse Mortgage Works, What It Is And How To Use One
Most people understand how a mortgage works. You apply for a loan that helps you purchase a home or refinance a current loan. There are a number of criteria that you have to meet before being approved for the new loan, of course, and a number of other fees that you have to be aware of. With a reverse mortgage, you are living in your home already and apply for a loan that draws on the equity that is already built up on its value.
During the time you are paying your conventional mortgage, you are building equity with your home, lowering the amount of debt on it and increasing its value. The reverse mortgage is based on that value and that equity. There are some major differences between the traditional mortgage and the reverse mortgage. For traditional mortgages there are a few basic items that differ.
One, virtually anyone can apply for the home equity line of credit provided they have built actual value into their home.
Two, there are limits to how the money can be disbursed to you and what it can be used for.
Three, there are limitations to how much you can draw on the credit built into the home in the first place.
That is not to say there are not restrictions with the Reverse Mortgage Quote as well, because there are. You have to be at least 62 years old at the time you apply for this type of loan and there are other criteria that must be met as well.
The home must serve as your primary residence. In addition to who can apply and be approved for the reverse mortgage, there are restrictions for the loan originators that can issue one.
Because the reverse mortgage is one that is government insured, the applicant is required to speak to a government approved loan counselor before the application is completed. Reverse mortgages programe generally don"t reserve for taxes and insurance so you must pay your them yourself.
The biggest difference between the home equity line of credit and the reverse mortgage is that with a reverse mortgage you must make a monthly payment. You can have the money given to you as a lump sum, one-time payment, as monthly payments, as a line of credit or as any combination of these. The money can then be used for any purpose including paying off bills, medical care and therapy, vacations or ongoing living expenses. In fact, many people who have previously retired are turning to the reverse mortgage for their living expenses rather than having to face the prospect of looking for and returning to work. The huge benefit of the reverse mortgage is simple: you do not have to make a payment on this money unless you either move from your home, sell your home or die at which point your mortgage would have to be paid from the proceeds of the sale or by your estate.
by: Leonard H. Franklin
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