The Uniqueness Of Reverse Mortgage
A reverse mortgage is a unique type of mortgage that is designed specifically for senior citizens who are also home owners
. It basically allows senior home owners above the age of 62 to convert a portion of their home equity into cash payments. The uniqueness of this type of mortgage is that there is no repayment required while the home owner is still living in the same house. This is the one feature that you may not be able to find in any other conventional type of mortgages. The benefits of this particular type of loan are that it is provided and insured by the US Department of Housing and Urban Development.
In general, almost all types of dwellings may be eligible for a
reverse mortgage as long as the borrower owns and occupies the home and the owner is at least 62 years old. It is often compared to home equity loans and second mortgages but the difference is that this type of mortgage pays you over time and is made available regardless of your income and debt-to-equity ratio. The amount borrowed may also be determined by the age of the home owner, the value of the home and the current interest rate. The loan is also not due as long as you live in the home. So there is basically no risk of foreclosure as long as you consider the home your primary residence. This is in obvious contrast to the conventional second mortgage or a home equity loan that requires you to have sufficient income with a low debt-to-income ratio in order to qualify for the loan. With conventional loans you may also be required to make the mortgage payments on time and if you fail to do so you might run the risk of foreclosure.
There are generally five options for you to receive your money and they are as follows:
Tenure your loan may basically be distributed into equal payments for as long as one of the home owners lives and continues to live in the home as a primary residence.
Term your loan may be distributed into equal monthly payments for a fixed period of time.
Line of credit this option enables you to withdraw the amounts of your choosing as and when you need it until the total amount in the line of credit is exhausted.
Modified tenure it is basically a combination of the line of credit option with monthly payments for as long as you maintain your home as your primary residence.
Modified term it is basically a combination of the line of credit option with monthly payments for a fixed period of time.
If you are in the market for
reverse mortgages it might be good for you to shop around for the best deals and rates. You may want to compare your options and the different terms offered by different lenders. If you wish to remodel your home or need help paying your property taxes you may try to find out if you qualify for a low-cost single-purpose loan. A single purpose reverse mortgage might not be available everywhere and is generally used for only one purpose as specified by the government or non profit lender.
If you live in a high-value home, you might be able to borrow more but you might want to bear in mind that the more you borrow, the higher your costs. It may not really matter much on the type of reverse mortgage you are considering as long as you understand all the conditions and you may ask your counselor or lender to explain the
reverse mortgage rates to you if there is anything at all that you may not comprehend.
by: Ask Bill
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