What Is A Reverse Mortgage? A Reverse Mortgage FAQ
These are common questions people have regarding reverse mortgages. See your mortgage broker or real estate attorney for more specific information.
What is a Reverse Mortgage?
A reverse mortgage uses part of a home owner's equity to provide immediate cash to the home owner. Payments to the homeowner can be made in a multiple of ways. The reverse mortgage is only paid off upon the death of the borrower or sale of the property by the borrower.
How is a reverse mortgage different from a home equity loan?
Home equity loans are paid back over a period of scheduled payments for a set number of years. A reverse mortgage is repaid when the borrower no longer uses the home as their primary residence. Borrowers who have a high debt to income ratio or bad credit may also find reverse mortgages appealing because the equity in the home and the value of the home are more relevant factors than credit score. The home can also never be foreclosed as long as real estate taxes are kept current. Even if the borrower in a reverse mortgage outlives the loan the home will never be taken and the loan not paid off until the home is sold or the borrower dies.
Who typically takes out a reverse mortgage loan?
Many times senior citizens obtain reverse mortgage loans to offset the income provided by social security. Many senior citizens have a large amount of equity in their homes. Reverse mortgages can ensure that they have the cash needed to meet unexpected financial obligations such as home repairs or medical bills.
What are the requirements to receive a reverse mortgage?
The home being mortgaged must be owner occupied. Generally single family homes and small apartments and town homes are also eligible for a reverse mortgage.
How will a reverse mortgage affect my estate?
When the borrower of a reverse mortgage dies, the estate must repay the loan or the proceeds of the sale of the home will repay the loan. Any remaining equity will be given to the heirs of the estate.
How can I get more information on Reverse Mortgages?
Contact any reputable mortgage broker to obtain more information. It might be advisable to consult a real estate or estate planning attorney to make sure a reverse mortgage is right for you.
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John Gall is a full time IT Manager and IT Consultant in Minnesota. He runs several websites as a hobby featuring content similar to that in this article.