Reverse mortgage
Reverse mortgage is rather hot topic these days. Several readers have asked questions about reverse mortgage and we are going to try our best to explain this mortgage product. As housing market has significantly cooled off, and will likely slow even further, the same has happened to the mortgage industry, as both refinancing and purchase markets have been quite slow for the last several months. Naturally, banks are trying to find a new money niche somewhere and reverse mortgage has become such. Never have we seen so much advertisement directed on homeowners who, according to some ads, are "cash poor but house rich". You don't have to have income to qualify. Basically the main criteria is amount of equity in your house. And you don't make any monthly payments on reverse mortgage, instead, it pays back to you.
To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. Reverse mortgage is a loan against your house that you do not have to pay back for as long as you live there. With reverse mortgage, you are getting cash without having to move or to repay the loan each month. You can get your money in several ways:
- single lump sum
- regular monthly check
- account set up as a line of credit
- combination of these payment methods
No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home.
So what you have with reverse mortgage is the truly reversed or opposite situation from regular or forward home mortgage - with forward mortgage, you use your income to repay debt, and build up equity in your home. With reverse mortgage, you are taking the equity out in cash. So with reverse mortgage and your debt increases and your home equity decreases. To put it simply, reverse mortgage is like home equity loan or second mortgage which you don't have to pay back monthly. It will be repaid from the proceeds of the sale of your house, but only when you sell or are dead. For different types of reverse mortgages and additional information on reverse mortgage vs. selling your home, you can visit National Reverse Mortgage Lenders Association and American Association of Retired Persons.
Thu Jul 20, 2006 12:07PM | Copyright: www.bad-credit-advisor.com | More in Mortgage | Comments (0)
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