What Is A Reverse Mortgage?
A reverse mortgage is an easy way for older homeowners to leverage their home equity to pay their bills despite lower income. It is most offered to the elderly in developed countries like the US and UK. With a reverse mortgage, a person takes a loan against the equity in the home and gets multiple payments. The money from the loan can be used for medical bills, home care, retirement or convalescent care, nursing help and other expenses. A reverse mortgage is very different from a normal mortgage loan.
There are a few requirements to satisfy for you to be eligible for a reverse mortgage. The first is that you must be at least 62 years old. You don't need credit or employment verification, and you don't need to show income proof. You just need to have enough equity in your home. Some types of homes don't qualify, like mobile homes and trailers in trailer parks may not qualify for a reverse mortgage.
The equity of the home is used as the basis for the reverse mortgage. Equity is the difference between value of the home and the current mortgages - it's the amount that is not owed. The equity of a home is inversely proportional to the mortgage. The higher the mortgage, the lower the equity. If the mortgage is paid off, all of the value of the home isequity. The higher the market value of your home, the eauity your have to borrow against. The government usually decides the interest rate that can be charged.
Unlike other mortgages, you generally don't have to repay the loan. The reverse mortgage is due when the owner dies or moves out of his house. Then the individual or his heirs have a year to pay it back to keep the house or it has to be sold to pay back the reverse mortgage loan.
Lately, more and more reverse mortgages are being offered because the elderly don't have enough money to make ends meet, because social security isn't enough, and pensions are either not enough or non-exeistent. With inflation, expenses are just too much on a fixed income. Many elderly just can't meet their needs without help. Reverse mortgage can help the elderly in this kind of situation.
Choose carefully, if you want this type of mortgage. Make sure that your loan is for what your home is worth and not less. Many people find a reverse mortgage too costly because the fees are often too high. Except for high fees, reverse mortgage are often the best option for elderly on fixed incomes, who need a financial supplement.
