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What Is A Reverse Mortgage?
By Michael Louis
In today's fast paced world, where the cost of living increases on what seems like a daily basis, many people find it difficult to survive on the meager income that they receive. Older homeowners who are finding it hard to make ends meet have a special option that no other homeowner has access too; a reverse mortgage.
A reverse mortgage is specifically designed for older people who have worked their entire lives to achieve a comfortable place in their senior years. It can be granted to those who are over the age of sixty-two; however as with any other type of loan, there are certain conditions that apply in order to be approved for the reverse mortgage loan.
The first condition is the youngest of the couple has to be at least sixty-two years old, and the second condition is that the homeowner has to own at least seventy-five percent of the equity in their home.
A reverse mortgage is when the homeowners receive payment for the equity in their home in monthly installments. There are no repayment costs until the homeowner either sells the home or dies.
This type of loan is great for elderly homeowners who are on a fixed income and cannot pay their bills or supply food. It is a way to supplement the monthly income of those who are on social security. A reverse mortgage loan does not affect the social security benefits that a homeowner receives because it is not taxable, and is not claimed as income.
One of the most common uses of a reverse mortgage is to pay monthly bills such as insurance, taxes and to maintain the home. Many older people have to choose between paying these bills and buying food and medicine.
Although there may be substantial equity in your home, your age will determine the amount that is granted for the reverse mortgage loan, as will the assessed value of your home. It is important to understand that there most likely will be a monthly service fee on the life of the loan.
When the homeowner either sells the home or passes away, the loan is paid in full through the sale of the home. If for some reason the selling price of the home does not meet the loan amount, the lender has to absorb the remainder of the loan. The debt cannot be attached to the estate of the homeowner.
Michael Louis is always on the look out for a good deal and enjoys sharing his secrets. Did you find these tips useful? You can learn more at All About Mortgages.
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