Reverse mortgages are used to assist seniors who want to supplement their income with mortgage payments, but instead of paying the bank, those who take out the loan actually get paid. I spoke with someone the other day who had a completely mistaken concept of what these are used for and had the mistaken idea that these were simply a tool that ended up scamming seniors out of their retirement.
I heard it explained this way: Reverse mortgages are no free lunch which is true, but we also would consider that these mortgages are a great tool for many seniors who simply need or want some extra funds to supplement their retirement, improve their standard of living, do some traveling or any number of other things.
There are a lot of misconceptions about what reverse mortgages are and what they can be used for as well as how they work. Before I get into all of that, you need to know that these types of mortgages are a completely legitimate financial tool. You may start to see more and more news stories about these types of mortgages.
One of the protective features that are built into the reverse mortgages is the requirement that each applicant receive counseling from a 3rd party counselor that isnt related to the lender in any way. These counselors must work with the borrowers and provide documentation back to the lender prior to being able to approve the loan.
This process insures that the seniors receive the type of advice they need prior to making a decision like this. So, here are some of the details of this relatively new type of mortgage. These work based on seniors who will be moving out of their home at some point in time and the fact that these homes have equity. The bank or lender is relying on the ability to recoup funds from the refinance of the home or the sale of the home when the loan comes due.
The loan will come due when the borrower moves out of the home permanently or if the borrower dies. The main requirements of the homeowner are that they maintain the home, pay the property taxes and the homeowners insurance. To qualify, the minimum age is 62. Typically, the older you are, the more youll qualify for because there is the assumption that you wont be in the home for as long.
There is a lot of information online about reverse mortgages. Do your research and make sure you ask as many questions as you may need to get the answers as to whether or not reverse mortgages are right for you.
Any individual who is considering a reverse mortgage has a very important decision to make. Most of the time, an individual who is considering this type of loan is doing so because he or she needs the funds for some main purpose. For example, an individual may not be brining in enough from social security, pensions, or savings to maintain his/her living expenses. Someone may have a large purchase that is necessary, such as a new vehicle. Or, that same individual may need the funds for home improvements. Some individuals use the funds that they receive from a reverse mortgage to fund a second home or a recreational vehicle. If the funds are needed, those that have ownership, and more importantly, equity in their home, have the ability to secure this virtually free type of mortgage.
To qualify for a reverse mortgage, you must be at least 62 years old. The older you are, the more money you can receive in your home mortgage on a monthly basis. You may opt to receive the cash out from the equity in your home in one lump sum, if you so desire. In any case, the processing of a reverse mortgage is quick and painless, which means you will have access to the finances you need much quicker.
One of the main criteria for qualifying for this type of mortgage is equity. You need to have a significant amount of equity available in your home, since the equity that available is ultimately what you will be tapping into to gain access to the money you will be receiving. Equity can be defined as the amount of money that the home is worth, minus any mortgages or liens that may be on it. The higher the level of equity, the more of the home that you own. When you pay off your mortgage in full, the equity and the value of the home are the same. Those that are looking to use a reverse mortgage need to have at least some equity to cash in, since this is where the funds come from.
If you still owe money on your home, the equity you cash out in a reverse mortgage will be needed to pay down the rest of what is owed on the mortgage. The rest will be yours to use as you please. Unlike other loans, you can use the funds for anything that you see fit, once the mortgage on the home is paid for.
The reverse mortgage is an ideal choice for those people who are in need of funding, but do not have access to money from any other sources. Since the funds for a reverse mortgage are not due to be paid back, in most cases, the homeowner actually has access to money in the value of their home, until he or she dies or moves out of the home,. Additionally, should the value of the home increase from the time the initial reverse mortgage is obtained, a second or even third reverse mortgage may be taken out.
Both Ben Needles & Tabitha Naylor are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Ben Needles has sinced written about articles on various topics from Business Credit Cards, Anger Control and Business Credit Cards. About the Author (text)Brian Armstrong is a loan officer and is licensed to assist seniors to establish a Utah reverse mortgage. You can read more about reverse mortgages on his website. Ben Needles's top article generates over 550000 views. to your Favourites.
Tabitha Naylor has sinced written about articles on various topics from Vitamins, Mortgage and Home loans. Tabitha Naylor is an experienced mortgage broker/consultant with Apex Financial Mortgage. For more information, or additional resources on home loans, visit