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What Is A Reverse
Mortgage?
A reverse mortgage is a mortgage that is geared to the
elderly homeowners out there. This type of mortgage will
allow them to use some or all of the equity that they have
built up into their home over the years. Those that need
funds to pay for medical bills, for long term care or to
make improvements on their home can usually use the equity
in their home to make these improvements. These loans are
somewhat different than the conventional mortgage though.
To qualify for the reverse mortgage, you need to be at least
62 years of age. There are no credit or employment
verifications. Some homes, such as those that are mobile
homes, do not necessarily qualify for this type of loan
because they may not be worth as much. The mortgage is
taken out on the equity of the home. Equity is a term that
describes the value of the home minus any mortgages or liens
that are being held against it. The equity of a home goes
up as the mortgage of the home is paid down. When the home
is completely paid off, the equity of the home is the same
as the home’s value on the market.
This type of mortgage is a bit different though. Generally,
you will not need to repay the loan. In 95% of the cases,
these loans will not be repaid. The mortgage becomes due
when the homeowner dies or moves out of his home. At that
point, he or she will have up to a year to repay the reverse
mortgage or the home will be sold to pay off the mortgage
loan. In most cases, the heirs of the property will be the
ones to make that decision.
In the last several years, the numbers of reverse mortgage
applications has grown significantly. This is due to the
lack of funds that are needed to fund living expenses.
Social security and pensions just do not seem to be enough
for most. Therefore, the reverse mortgage can help them to
make ends meet or do the things that they would like to do
without worry of the cost.
It is important to consider this type of mortgage carefully,
though. Like any other mortgage, you are taking out an
amount of money on your home’s value. It is often a costly
thing to do simply because of the fees involved. But, for
many, there is no reason not to consider a reverse
mortgage.
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