Reverse mortgages are a way to be deemed as options for senior citizens as a way to get financially helped in their retirement years and living at their permanent residence at the same time. If you are about to begin your retirement or confront some unforeseen medical expenses, you should definitely apply for reverse mortgage. This article helps in focusing on the basics of reverse mortgage and the benefits associated with it.
How does it work?
It is a type of loan that lets the homeowners use the equity in their home as collateral for a loan. Rather than making mortgage payments on a monthly basis, they are responsible for paying back the loan when they aren’t living in the designated home anymore. The payment encompasses accrued interest and fees. These mortgages are viable for only those who are of age 62 or more. In this mortgage, the lender pays a lump sum to the homeowner on a monthly basis or offers a line of credit. The home equity declines as the homeowners borrow more money as the time passes by.
The balance of the loan is because of the lender when either the borrower sells away the home or dies. The loan could be due early if they property taxes are not paid, the house is maintained or condemned. The homeowner himself or his heir are needed to pay off this mortgage strictly with the proceeds by selling away the home. If the heirs wish to keep the property, they will have to find other means of paying off the loan.
What are the benefits associated with it?
This mortgage helps in paying off your existing mortgage, health care expenses or used as a source of income. Many times, unforeseen situations may crop up and you aren’t able to use your monthly income to cover it, but this is where reverse mortgage lenders comes to the rescue.
If you are the owner of your house and not planning to move when your retirement strikes, reverse mortgage allows you to make the best of the equity in your home with no need of downsizing it. As many of these mortgages don’t tend to be repaid until the homeowner passes away, the funds from this mortgage can have a significant impact on the quality of life of the homeowner in the later years. This mortgage helps in getting rid of the frustration by handling your finances keeping in mind that the money is securely tied up in your home’s equity.