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Reverse Mortgage: Is It Right For You |
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Reverse mortgage is a
kind of specialty loan that is made on the equity, which has been built up in a
home. Till now only two main ways were there to fetch cash from home-either by
its sell which moved the owner out of the home; the other way was to borrow
money against the home for which the owner had to make regular monthly loan
repayments. Now, reverse mortgages provide the owner with the third option of
getting money against home, and the interesting aspect of these loans are that the
owner doesn't have to leave the home or make regular repayments. Reverse
mortgage allows the owner to receive a line of credit, cash or a new source of
tax-free monthly income.
Are you the One? To be eligible for reverse mortgage, the borrower must be an elderly homeowner of 62 years of age or above. Or, he or she should have a low mortgage balance that can be paid off at the time of closing with the proceeds from the reverse loan, and should stay in his or her home. The homeowner gets reverse mortgage funds in a lump sum, in monthly advances, through line of credit, or in combination of the above depending on the type of reverse mortgage. Generally, the amount to be borrowed under reverse mortgage is based on the homeowner age, the equity in the home, and the interest rate the lender is charging. The owner retains the title of his or her home with a reverse mortgage. The lender does not take the title of the home when the owner dies, and the heirs of the owner have to pay off the loan to hold the title of the home. Usually, the repayment of debt is done through refinancing the loan into a forward mortgage, or by the proceeds from the sale of the home. The heirs keep the money in excess of the amount owed. The Way it works Under reverse mortgage, the owner doesn?t need to repay loan as long as he or she lives in the home. But if the borrower dies, sells, or moves permanently from the home, the loan amount needs to be paid in full including all interest and other charges. As the borrower doesn?t make monthly payments, the owed amount gets larger over time, which can be larger than the money from the sale proceeds of the home to pay back the loan. Thus, the owner can never borrow money more than the value of the home at the time of the loan is repaid. Your Routes To The Money It is also important to understand how the money can be received under reverse mortgage loans. The loan amount is paid to the borrower in a single lump sum, in a monthly advance or as a line of credit. Also, money can be asked for a specific period of time (for five or ten years), and after that period the monthly checks stop. The homeowner can receive money in a combination of a credit line and monthly income. Conclusively, reverse mortgages serve the homeowner in a number of ways and offer an array of options to receive the money! |
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