The Real Estate Encyclopedia
Reverse Mortgages
Category - Real Estate Information Sources - Real Estate Information General

Itís no secret that home equity can be used strategically to meet long-term financial goals.  Whether you are in the market for a mortgage or already have one, it is important to continually assess how your home mortgage is working for you and whether or not you have the best mortgage rates available to you.  Perhaps the most misunderstood of mortgages to understand is a reverse mortgage.

One of the reasons for this is that reverse mortgages are only available to individuals over 62 years of age so they clearly arenít for everybody. The older you are, the more funds you are likely to receive.  They were originally designed to help elderly individuals in or nearing retirement supplement a limited income while using their home as collateral for the borrowed money.  A marked difference between traditional mortgages and reverse mortgages is to the mortgage payments are paid to. Instead of the borrower making payments to the lender, the lender makes payments to the borrower. Hence the term reverse mortgage.

The lender is the first lien holder on the property and must be repaid once the ownership of the property changes. If you have any existing mortgage when you are applying for a reverse mortgage, you must use the reverse mortgage to pay off the existing mortgage to ensure that the lender of the reverse mortgage is the first lien holder on the property.

These types of mortgages are gaining more and more popularity as the baby boomer generation ages and need to cover living expenses during their retirement years.  This means that more homes that are passed down to children are going to come with a bill attached.  Even with this stipulation, a reverse mortgage might be the best option for you if you are over 62 old as the proceeds from the reverse mortgages are not considered income and therefore are not taxable.

 Even though the product was originally designed to help supplement income, there are no regulations in place that dictate how the money paid to the borrower is spent. Bear in mind that not every type of home qualifies for a reverse mortgage including vacation homes and investor properties.  For a home to qualify for a reverse mortgage, it must be the primary residence of the borrower.

The borrower will never owe more than the loan balance or the value of the property, whichever is less. 

Payment from the borrower on a reverse mortgage becomes due when either the borrower passes away or when they move out of their home for 12 consecutive months so the borrower will never outlive their reverse mortgage and be forced out of their home.  It is however, the responsibility of the homeowner to maintain the home, keep property insurances current, and pay all taxes owed on the property. Failure to do so could result in default of the loan.

If you think a reverse mortgage might be right option you, you should contact a reverse mortgage specialist so they can run you through all of your options and help you find the best mortgage rates available.

 
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Real Estate Information Sources - Real Estate Information General
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