What is Reverse Mortgage
A Reverse Mortgage is a secure mortgage loan against your real estate property for the senior citizens but here you need not to make monthly payments. Reverse mortgage is an easy source for tax free income for the senior people who are more than 62 years old.
Reverse mortgage is a great way to get tax free cash flow for the retire persons. Thousands of people have taken the benefits of reverse mortgage. A reverse mortgage works in the opposite manner to the typical mortgage loan. Here you need not to pay the monthly mortgage payments but you can get money on monthly basis.
If you have taken the reverse mortgage to release the equity that you have gathered, you can still live in your house. The loan to value ratio is generally 60 percentage but some banks are even designing the loan as much as 80 to 90 percentage.
How does reverse mortgage work?
Once the loan amount is issued to a person; the lump sum in divided into small amounts to be given to the old borrowers all throughout the years that they plan to opt for the loan. This amount received every month can act as a monthly income for the old couple. The bank will cease to pay this monthly amount at the end of the loan tenure.
However, if one of the spouses expires, the other one can continue to live in the house. Once both the borrowers die then the inheritors of the property are given two options by the bank. Either they can pay of the mortgage loan and hold on to their property or they can let the bank own the property and thus clear off the outstanding loan.
How is the Reverse Mortgage loan paid back?
The loan need not be paid while the couple is alive. Since no requitals are made during the loan tenure, the loan balance increases consecutively.
Reverse mortgage loans are an excellent way to get a steady source of monthly income for old couples.
Eligibility for Reverse Mortgage:
- You should be more than 62 years of age
- The property should be your primary residence
- Your house should be a single family residence
- Your house should be HUD approved
Reverse Mortgage Benefits:
- An easy way to get tax free income
- You will retain life long ownership of your property even after the reverse mortgage
- You need to make any loan repayment as long as you live in the property
- There is no minimum income or credit requirement to get approved for the reverse mortgage
To get the reverse mortgage you need make a high upfront cost and that is why some senior citizens choose other type of loans to release the home equity especially if they plan not to live in the property for more than 5 years. Some people also sell the property and move to other less expensive dwelling place.
Is Reverse Mortgage a Good Idea for Senior Citizens?
Everyone know that in case of any mortgage you purchase a home or a real asset in against of a long term loan and you pay the monthly payments of the loan with interest on it but the reverse mortgage is opposite of any normal mortgage in which the homeowner will not pay anything but the lender will pay to him for his lifetime a monthly payments in against of his home equity. The all senior citizen of America keep it as a retirement life security and that is way this reverse mortgage is so famous and familiar to all Americans.
The lender of a reverse mortgage will pay a lump sum amount of money or monthly payment as per the homeowner’s equity percentage of their age until the death of the homeowner. If the lender paid the total mortgage amount at time it will be more beneficial to the lender instead of paying throughout the every month end but the homeowners are feeling risk because they may finish this fund within some years.
When the lender pay monthly payment to the reverse mortgage holder this will help them to send life smoothly with a monthly income even after their retirement. The homeowner need not to pay the loan. After the competition of the total payment of the reverse mortgage to the homeowner the lender will hold back the reverse mortgage loan still the death of the homeowner or the leave from home for more than 364 days of the homeowner. The lender will sell the home for repayment of the reverse mortgage loan.
The reverse mortgage loan is the weapon of full utilization of the total home equity of the homeowner. They left nothing for their heirs. Day by day the reverse mortgage becomes a curse for the future generation of the American small families.