Reverse Mortgage Basics : A New Kind Of Loan

Reverse Mortgage Basics : A New Kind of Loan

by

springersf

If youre a home-owner who is sixty two years of age or older and youre having trouble making ends meet , consider a reverse mortgage. A

reverse mortgage

is a new type of mortgage that you can apply against your home. It converts part of the equity in your home into cash without requiring you to sell your home or pay monthly bills . Generally , the older you are when you apply, the higher the equity-to-cash ratio will be.

A reverse mortgage

doesnt have to be repaid as long as the home remains your primary residence, but it has to be repaid when the last surviving borrower dies , sells the home , moves out, refinances the home or fails to meet the obligations of the loan. When that time comes, you have six months to repay the loans balance or sell the home to pay off the balance. Its unlikely that your home will sell for less than the balance of the

reverse mortgage,

but if it does, you wont be held liable . If you or your heirs would like to retain ownership of the home , however, you must repay the loan in full, even if you owe more than the home is worth. If there are proceeds beyond the amount owed, they will be transferred to your spouse or estate.

Reverse Mortgages vs. Traditional MortgagesReverse mortgages

are referred to as such because they are essentially the opposite of

traditional mortgages

. Homeowners with a conventional mortgage begin with little to no equity in the home and then gradually pay the lender until they have 100% equity and own the home outright. On the other hand, homeowners with a

reverse mortgage

begin with significant or complete equity in the home, and the lender makes payments to them. Over time, the homeowner loses equity and the lender obtains equity.

When you have a reverse mortgage

, you continue to own your home and pay property taxes, utilities, and homeowners insurance just like always. The difference is that the lender pays you each month and there are no principal and interest payments to worry about.

Reverse mortgage

loan advances arent taxable. To be eligible for a reverse mortgage, you must be 62 years of age or older, reside in your home, and own your home outright or have a low mortgage balance that can be paid off at closing with proceeds from the reverse mortgage.

Is a Reverse Mortgage Right for You? If your income is minimal and youre struggling to keep up with living expenses, a reverse mortgage

may be right for you. A

reverse mortgage

can help you stay in your current home or enhance your retirement years by covering the cost of medical care, home repairs, and more. If you are capable of meeting your financial obligations with the assets you have, however, obtaining a

reverse mortgage

probably isnt a good idea. Only those with significant financial need should consider a reverse mortgage, as it involves giving up equity in your home.

To determine whether a reverse mortgage

is a good option for you, assess your financial situation thoroughly and predict your future needs. It is also required under federal law that you meet with a housing counselor, who will explain what

reverse mortgages

are about and explore possible alternatives with you. If you determine that a

reverse mortgage

is indeed appropriate for your situation, investigate different lenders and ask friends and family for recommendations. As with any type of mortgage, it pays to shop around!

http://www.keithspringer.com

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