A new term, reverse mortgage, is simply a loan against your
home that you do not have to pay back for as long as you live
there. That means that with a reverse mortgage, you can turn
the value of your home into cash without having to move or to
repay the loan each month. The best thing is that the cash you
get from a reverse mortgage can be paid to you in several ways.
You can get it all at once, in a single lump sum of cash, as a
regular monthly cash advance or as a credit line account that
lets you decide when and how much of your available cash is
paid to you. You can also have a combination of these payment
methods.
It does not matter how this loan is paid out to you, you
typically don?t have to pay anything back until you die, sell
your home or permanently move out of your home. To be eligible
for most reverse mortgages, you must own your home and be 62
years of age or older. For once it is really great to be old!
To qualify for most loans, the lender checks your income to see
how much you can afford to pay back each month. The difference
with a reverse mortgage is that you don?t have to make monthly
repayments. So there is no need for a minimum amount of income
to qualify for a reverse mortgage. You can have no income and
still be able to get a reverse mortgage.
With ordinary home loans you can lose your home if you don?t
make your monthly payments on time. With a reverse mortgage
there are no monthly repayments to make so you can?t lose your
home by not making them. The usual reverse mortgages require no
repayment for as long as you or any co-owner live in the home.
The difference from other home loans are important in theses
ways:
You don?t need an income to qualify for a reverse mortgage
You don?t have to make monthly repayments on a reverse
mortgage.
You can easily see how a reverse mortgage works by comparing it
to a forward mortgage which is the kind you use to buy a home.
Both types of mortgages create debt against your home and both
affect how much equity or ownership value you have in your
home. They do so in opposite ways.
When you purchased your home, you probably made a small down
payment and borrowed the rest of the money you needed to buy
it. Then you paid back your traditional forward mortgage loan
every month over many years. In that way your debt decreased
and your home equity increased. One can say that your forward
mortgage gave the result of falling debt and rising equity.
The purpose of reverse mortgages are different than forward
mortgages. With a forward mortgage, you use your income to
repay debt, and this builds up equity in your home. With a
reverse mortgage you are taking the equity out in cash.
A reverse mortgage increases your debt and your home equity
decreases. It is just the opposite, or reverse, of a forward
mortgage as the lender sends you cash and you make no
repayments. The amount you owe gets larger as you get more and
more cash and more interest is added to your loan balance. As
your debt grows, your equity shrinks, unless your home?s value
is growing faster than the interest rate.
In short on can say that a reverse mortgage is a “rising debt,
falling equity” type of deal. But that is exactly what informed
reverse mortgage borrowers want. They want to spend some of the
value in their home while they live in their homes.
About The Author: Keith George always writes about valuable
news & reviews. A related resource is
http://the-reverse-mortgage.info/ Further information can be
found at http://find-medicine.info
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