What is a Reverse Mortgage Loan?
What is a reverse mortgage anyway? Although reverse mortgaging has been available for some time now, many people are just now finding out about them.
People want to know what the advantages and disadvantages are and just what exactly their purpose is.
Basically, a reverse mortgage is exactly what the name says, it is a mortgage but opposite of a regular mortgage. Instead of taking a loan out to buy your home, you are taking a loan out against what you already own of your home or “equity” you have on your home.
There is criteria involved with these loans. You must be 62 years of age and own your home with no mortgage, or very small mortgage payments left to pay. The loan size is determined by the person’s age, the interest rate, and the value of your home.
The reverse mortgage allows the homeowner to borrow against the “equity” in there home. The person can receive this loan in a few different ways. They can receive it in one lump sum, they can get it divided in to equal sums that would be given monthly, or on an occasional basis as a line of credit, or even a combination of these methods.
No matter what method your loan is paid out to you, you typically don’t pay the loan back until you either sell your home, permanently move out of your home, or you pass away.
Most home loans require you to make a monthly payment, with a reverse mortgage you are not required to pay any monthly payments. Another criteria of most loans is you have to make a certain amount of money to qualify. A reverse mortgage does not have any income criteria. You could have absolutely no income and still qualify for a reverse mortgage.
When applying for any loan it is important to explore different avenues of obtaining your loan. Different lenders have different rates. Many loan companies have been taken to court, and have extremely high interest rates etc. Make sure to read and investigate thoroughly before entering into a contract.
Some state and federally funded places offer reverse mortgages which could likely be your best resource. Just keep in mind when choosing a company to do your reverse mortgage, there are many different avenues to choose from, so do your research.