This mortgage is known as a “Lifetime Mortgage” in the UK. It is used by seniors to liberate the equity on their homes to spend as they wish.
What are the conditions for a Reverse Mortgage? This loan is available to seniors who have only a small outstanding amount on their mortgage. There are no qualifications for the loan with regards to health, income or credit. It pays out regardless of current income, social security payments etc.
Benefits of a Reverse Mortgage – There are many benefits of this mortgage plan, the main one being that it offers seniors enhanced financial security. It enhances whatever income they are already receiving and can assist pay for home improvements, unforeseen medical bills, vacations etc.
No repayments are expected from the home-owner until they no longer use their home as their chief residence. This is what makes the Reverse Mortgage differ from traditional home equity loans or second mortgages. It also benefits because the borrower still owns the property, the lender does not own it. If the borrower out-lives the Reverse Mortgage, the company cannot demand loan payment and they cannot take away the home. Another point is that the borrower can never owe more than what their property is worth. Their responsibility to repay the loan is stalled until the property is sold, the owner(s) dies or it is no longer their main place of dwelling.
How much money can a home-owner receive from a Reverse Mortgage? The way this works normally is the older the home-owner is and the more valuable the property the more you can borrow.
The borrower still would have to pay bills and taxes etc. and there usually a few costs when applying for a Reverse Mortgage. Most have an application cost, origination cost, closing costs, insurance and a monthly servicing fee. However, these would be added to the Reverse Mortgage, they would be paid for at the end when the loan needs to be paid. All Reverse Mortgages have adjustable interest rates linked to the financial index and would adapt accordingly when market conditions change.
What would happen when a borrower sells their home? When the home-owner sells home, dies, etc. they or the estate will pay back the loan that they were receiving from interest rates and other payments through their Reverse Mortgage. If there is any leftover equity, it will belong to the borrower or their inheritors. The debt will not be given to any other estate or successors.
What are the payment options for a Reverse Mortgage? There are five main ways in which you can receive payment from your Reverse Mortgage and they are as follows:
o Tenure – For as long as the home-owner lives and continues to class the property as their primary residence, they will receive equal monthly payments.
o Term – For a set number of months predetermined in the contract, the borrower will receive equal monthly payments.
o Line Of Credit – This is set by the borrower, when and how much they wish to receive in payments until the credit line has run out in either unset payments or installments.
o Modified Tenure – This is monthly payments for however long the home-owner stays in the property combined with line of credit.
o Modified Term – Again, combined with line of credit, the borrower would choose how many monthly installments they would like to receive.
This is an ideal mortgage plan for elderly clients who wish to enjoy the final stages of their life and release the equity they have in their property.
Jim Power is writer for the Mortgage Saving Site http://www.mortagesave.com where there is more information to be found on Reverse Mortgage
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