Reverse Mortgage Tips
A reverse mortgage is a special type of loan in which a financial institution (a lender) can convert your home equity into cash. Unlike traditional mortgages, a reverse mortgage is a type of mortgage in which the lender is the one that is paying you for your home equity instead of you paying them.
The payments and their amounts depend on your home’s equity and value but also on the age of the applicant. These payments can come in different forms such as a lump payment, monthly installments, a line of credit or any combination of these. There are also no repayments necessary unless the applicant sells his home, moves out of his home or passes away.
Some of the most common requirements for these types of mortgages are:
- The applicant must be at least 62 years old
- The applicant must have a lot of equity in his home
- The reverse mortgaged home must be the applicant’s primary residence
- The applicant must own the home, or have a very little balance on it’s mortgage
The good thing about these types of mortgages is that the applicant doesn’t need to show proof of income, and also they have a very low credit requirement.
Some of the disadvantages of these types of loans are that they’re quite expensive. They can cost you up to 10% of the value of your home over the course of the loan in fees, origination fees, appraisals, titles, insurance premium and you will still have property taxes and home maintenance expenses on your hands. Also if you intend to leave the property to your heirs, it is not a good idea to engage in such a loan because your heirs would have to pay the whole refund otherwise they will not be able to have the property.
People usually look for such of loan when they are completely out of other options like renting the house, selling it or are unable downsize their expenses any longer.
This is pretty much a last resort option for anyone but considering the bad economy going on these days, there are around ten thousand people that consider and engage in such loans each month.
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