What is a Reverse Mortgage?

There are many types of mortgage options available to borrower, however, there is one type of mortgage option that is only available for senior members of society which is known as a reverse mortgage. The idea of a reverse mortgage is that it is only available to homeowners who are aged 55 years old and above. The basic process of a reverse mortgage is to allow elderly people to convert part of the equity in their homes to cash.

The idea of reverse mortgage was created to allow with limited income stay in their homes by using equity in their homes. This would enable them to cover expenses such as health care and other basic living expenses. When proceeds from the reverse mortgage are received, there is no limitation as to when and how the proceeds can be used.

Reverse mortgages are called as such because instead of making monthly payments to a lender, the lender makes monthly payment to the borrower, or advances them a lump sum. When a homeowner applies for a reverse mortgage, the borrower is not required to pay back the loan until the home is sold, vacated, or everyone on the home’s title has passed away. As long as the borrower is living in the house, it is not mandatory for them to make monthly payments towards the loan balance.

The Basics of Reverse Mortgages

It can be beneficial to be knowledgeable of the different types of reverse mortgages that are available you when making your selection. There are a few details that lenders will generally inquire about, and these are:

• Your age and the age of your spouse if they are listed on the title of your house
• Where you live
• The condition of your home, its type, and its appraised value.

One of the important aspects to remember is that the older you are and the greater home equity you have in your home, the larger the sum of money you will receive. However, this can be affected by current market trends. The money you receive can be used in different circumstances as there is no limitation or restriction as to how you would spend the money. The money can be used for:

• Payment of regular bills
• Cover healthcare expenses
• Pay for home repairs or improvement
• Repay debts

Because of the flexibility offered to you regarding how to spend the money, having a reverse mortgage makes it a versatile option for you.

There are different methods though which you can access your funds from your loan. One method is to take a one-time lump sum amount of money, or it can also be taken in an upfront portion with the rest over time. However, it is generally a good strategy to inquire about payment options from your lender since there can be restrictions and fees involved.

One of the benefits of having a reverse mortgage is that it is a highly powerful source of income for senior individuals. A reverse mortgage can be for those seniors who aim to increase their retirement funds or want to take on a big household project. Because the largest asset for a retiree is their home and in most cases all loans pertinent to their home are paid off, this becomes a source of increased income without increasing monthly payments and is a great way for retirees to stay in their homes.