Reverse Mortgage is Equity Home Loan

Reverse Mortgage is Equity Home Loan

Reverse Mortgage is Equity Home Loan

For many, reverse mortgage may be mortgage loans for the desperate while for others it could be a trade for the home ownership. For yet others it could be free money received from the government or such other entitlement programs. But in reality, reverse mortgage is none of these.

What is Reverse Mortgage?Broadly speaking reverse mortgage is just an equity home loan and is aimed at deferring the mortgage interests. It is not refinance as some people think but a way of deferring the repayments till the maturity of the loan.

HECMHECM or Home Equity Conversion Mortgage is the most common type of reverse mortgage plan around that was created by the Federal Housing Administration way back in the year 1989.

Point of DifferenceDifference of traditional mortgage loans and reverse mortgage is that in the former homeowners are required to make scheduled monthly installment payments. It could be anything from 10 to 30 years depending on the type of mortgage and requirements of the client. Such loans might have been obtained for buying another house or for any other purpose. On the other hand in case of reverse mortgage, the interest is not due till the mortgage is matured. Only requirement is that the homeowner still resides in the property and continues paying the property taxes and the insurance payments on the money borrowed by him or her.

Mortgagor Still Owns the Home MortgagesWhen someone obtains a home equity loan in form of reverse mortgage, the benefit for such person is that despite mortgaging the owner continues to own the house mortgaged. Only difference from the time when the property was not mortgages is that a monthly statement will come indicating every time the status of the mortgage. However, no monthly payment is necessary.

Reverse Mortgage EligibilityEligibility criteria for reverse mortgage are as follows.

Mortgagor should be US citizen;He or she should be permanent resident of the locality;Age of the mortgagor should be 62 years or above; andHas substantial equity in his or her home.Basis of Sanction of MortgageReverse mortgage is usually sanctioned on the basis of following factors.

Age of the home owner;Current mortgage rates; andValue of the home.However, there is no necessity of credit score verification because there are no monthly payments in reverse mortgage. Mortgagor continues to stay in his or her home paying the usual property taxes and insurances.

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