There are several types of mortgages available today. All of them offer their own set of advantages and disadvantages. Some are offered to help those in need. There are also those that present different terms that will help you have a more affordable loan. Among the types of mortgage, that you are probably less familiar with is the reverse mortgage. This is a type of mortgage available to senior citizens. However, what is this and how does this works?
Understanding the reverse mortgage
As the name suggests, this is different from the other loans because you will be using your home equity in advance rather than wait for it to build up. The most common type of reverse mortgage used in the US is the FHA insured, HECM or the Home Equity Conversion Mortgage.
Since the equity will be used in advance, the borrower will not make monthly payments. Instead, they will be receiving an agreed amount monthly. In addition to the amount, the parties involved will also agree on the manner of giving the money to the borrower. The borrower will only stop receiving the amount agreed if he moves to another property, or when the owner dies. In such cases, the mortgage will be paid.
How can the senior citizens take advantage of this?
As mentioned earlier, this is available to senior citizens only. Why is that? This is because most senior citizens are rich in asset but are poor in cash. Remember that most of them have stopped working. Thus, they do not have steady source of income. Some may have retirement plans, but usually not enough for their daily expenses and other emergency needs like medicines.
The advantages and disadvantages
Although it may seem a good thing to do a reverse mortgage, you should still compare its benefits and drawbacks. First, let us discuss the advantages of reverse mortgage. One is that you do not have to worry about defaulting. This is because you are not making monthly payments. Thus, you will not need to worry about missing your payments. In addition to that, this is also tax-free. Moreover, you do not have to worry about your credit or other restrictions. On top of that, you will receive the amount agreed in a manner most convenient to you.
There are several advantages, but there are a few considerations you have to make as well. First, receiving monthly payment through reverse mortgage might disqualify you from receiving other financial aid. Moreover, this is not a good idea to pursue if you have plans of moving in the next couple of years. Remember, you will pay the corresponding amount nonce you move and the monthly payment will stop.
How will you qualify?
Qualifying for a reverse mortgage is different from qualifying with other mortgages. Here, your credit is not the primary concern. What is important is that you reached the qualifying age. In addition to that, the property should be your primary residence. You should also be able to provide the necessary requirements like the appraisal of the property.
![[Valid RSS feed]](http://www.realestateproarticles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites