What Is A Reverse Mortgage And Should You Get One?
What Is A Reverse Mortgage And Should You Get One?. Reverse mortgages are for senior citizens who own homes and want monthly income.
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What is a Reverse Mortgage
Reverse mortgage is a new kind of loan against your home that you need not pay back as long as you live in that house. With reverse mortgage you can mortgage the value of your home in cash without repaying the loan every month and as well as without moving out of the house.
And this cash can be repaid in several ways like you can pay at one stretch in single lump sum of amount, or in regular cash advance monthly, or in credit line account that is you can decide how much available cash can be paid or combinations of any of these methods.
No matter how you pay back this loan, as you do not need to pay back anything until your death or sell your home or move out of your house permanently. For the eligibility of reverse mortgage you should have own your home and your age should be 62 years or older.
What Is A Reverse Mortgage And Should You Get One?. For other kind of loans the lender check your income documents for the verification of your repayment status monthly, but in reverse mortgage there is no need of repayment of loan monthly, so you need not require any income proof, even if you have no source of income but still you are eligible of reverse mortgage.
With other kind of mortgages you may lose you home incase if you do not make your repayment monthly, but in reverse mortgage you may not lose your home by not making the repayment, mostly reverse mortgages does not require any repayment as long as you live and that is the reason reverse mortgage differs from other loans.
With reverse mortgage your debt gets increased and the equity of your home decreases, as the lender lends you the cash and you don’t make the repayment, and the debt amount get increased as the interest is being added up with your balance loan amount and ultimately your debts increase and your equity decreases, unless the value of your home is getting increased.
Incase if the value of your home decreased there will not be any equity left out except your loan amount so it is nothing but spending down your home equity while you live in your home with out the need of making repayments.
What Is A Reverse Mortgage And Should You Get One?. Exception in reverse mortgages are when you get the loan advance without interest charged on it your debt would remain the same and your equity would grow with the increase in home value. But normally home value does not grow at high rates and also the interest rate is also charged so finally the majority of the reverse mortgages ended up with “falling equity and rising debt” loans.
What Is A Reverse Mortgage And Should You Get One?
What Is A Reverse Mortgage And Should You Get One?. Reverse mortgages are for senior citizens who own homes and want monthly income.
Who qualifies for a reverse mortgage?
- You must be at least 62 years old and have equity in your home
- You have equity in your home if your home is worth more than you owe on it
Here’s how it works
What Is A Reverse Mortgage And Should You Get One?. When you bought your home, the bank loaned you the money to buy it and you paid them back with monthly mortgage payments.
A reverse mortgage is the opposite. With a reverse mortgage, the bank pays you a monthly payment from the equity in your home.
You repay the money when you sell your home, refinance, permanently move out, or pass away. At that time, you or your heirs must repay the loan plus interest in one payment.
How do I get a reverse mortgage?
Reverse mortgages are available through most major banks and lenders.
Here’s what happens when you contact the lender:
- An appraiser will determine the value of your home
- The lender will tell you how much you qualify for based on your age, the equity in your home, and the cost of the loan
- You decide how you want to receive the money
You can receive the money:
- As a lump sum
- In monthly payments
As a credit line that lets you decide how much of the loan to use, and when to use it You sign a contract. The contract will outline the payments you will receive and the amount you have to repay including interest.
Maintaining your reverse mortgage
To keep your reverse mortgage in good standing you must:
- Pay your property taxes on time
- Maintain and repair your home
- Have homeowner’s insurance
Your lender can end the reverse mortgage and require immediate repayment if you:
- File for bankruptcy
- Rent out part of your home
- Add a new owner to title
- Take a new loan against your property
Things to consider
Reverse mortgages are more costly than typical home loans or home equity credit lines.
They also have higher interest rates and fees. Interest is charged on the outstanding balance and is added to the amount you owe each month. This means that your total debt increases each month.
Keep in mind that you are borrowing equity from your home. This means fewer assets for you and your heirs.
Shopping for a reverse mortgage
What Is A Reverse Mortgage And Should You Get One?. Shop around and get offers from several lenders. You should compare the terms, and look for a loan with the lowest interest rate, points and fees.
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