An Introduction To Reverse Mortgage
Reverse mortgage is a kind of mortgage focusing mainly on a lien on the property in question
. Interest is not collected on a monthly basis, but instead it is added up into a total amount and is then made into a lien unto the title of the property itself. A lien is a type or form of security interest in a land, house, building or any other immovable property that is granted to the creditor in order to guarantee payment from the debtor. If the debtor is unable to pay the creditor for the amount owed then the creditor can go after the property through the lien. As such, if the borrower or debtor in a reverse mortgage is unable to pay the creditor or lender, the latter will have the lien as an enforceable right in order to collect the amount owed from the former.
In the United States, such a mortgage is mainly available for senior citizens. It is typically used in order to release equity in the property, home, building or land in question in a single payment popularly known as lump sum. It can also be made through multiple payments. The obligation of the borrower or debtor to pay the mortgage or loan is only deferred in some instances. These instances include the death of the owner of the property, the subsequent selling of the said property, or if the owner of the said property leaves. If any of these instances occur then the payment of the reverse mortgage will be stopped. There are guidelines typically contained in the mortgage contract that indicate the deferment of the loan mutually agreed upon by both parties.
There are numerous requirements in order to avail of such a mortgage especially in the United States. First and foremost, the age of the borrower or the debtor must be at least 62 years. This requirement is a must since only senior citizens can avail of this kind of mortgage. The debtor or borrower must be 62 years of age at the time of the enunciation of the contract. The principle being followed in this type of mortgage is that the older the borrower or the debtor becomes, then the more lenient the qualifications for availing of this mortgage becomes. The age requirement cannot be any lesser as mandated by law.
Secondly, the money acquired from the loan may be used for any purpose, but the borrower or the debtor must make sure that he or she does not have any existing mortgage. Any existing mortgage must first be paid in full before a reverse mortgage may be availed. Any type of pending or imminent bankruptcy that has yet to be finalized will however halt or slow down the release of the reverse mortgage loan. Lastly, before borrowing, the applicant for the reverse mortgage must first consult a third party or independent financial counseling firm that is approved in the United States. This counseling is a prerequisite in order for the borrower and his or her family to understand the process undertaken in a reverse mortgage.
by: John Andrew
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