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.
to find out if a reverse mortgage is for you...read the next post.
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