Article by Dennis Chase, FreeMortgageIndex.com
Reverse mortgage is a type of loan that is available to only those belonging to an age group of 62 years and above. The senior citizens, by availing reverse mortgage, converts their home and real estate in liquid cash. This makes the senior citizens financially independent even though the amount of loan obtained does not surpass the value of their property. Reverse mortgage loan amounts are tax free and allows the owner to retain their ownership over the property, allowing then to carry on living in their property.
There are various rules of reverse mortgage. Firstly, the borrower has to be 62 years and above and should be the owner of the property. If there are partners to that property, it is necessary for the youngest partner to be no less than 62 years of age. Throughout the duration of the reverse mortgage, the borrower has to reside in that property and has to consider it as the primary residence. The home or property can not be a mobile home. It can also not be a co-operative. All the past debts have to be repaid back before applying for reverse mortgage.
There are some attractive features of reverse mortgage that makes it very popular. The borrower can utilize the cash obtained from reverse mortgage loans according to his own wish. In reverse payment stream, the lender gives monthly payments to the borrower that is a pointed contrast to the other types of loans. This monthly amount can be used by the borrower for various needs. All the monthly amounts are tax deductible. The repayment of the principal amount is not required until the borrower decides to live in some other place other than the property.
There are various types of reverse mortgage. The Federal Housing Administration insured reverse mortgage includes home equity conversion mortgages. They are available to those above the age of 62 years and come with a proper guarantee. The Lender insured reverse mortgage is available for monthly advances of loans with a line of credit. This type of loan is applicable as long as the mortgagor resides in the property. The loan types can be changed into fixed and variable types. Even though you have to pay higher cost for Lender insured reverse loans than the FHA insured ones, they give you a greater loan advance.
In the case of un-insured reverse mortgage, the senior citizens get monthly loan amounts for a fixed time period. This type of loan requires no mortgage premiums. The amount of interest for this type of loan is fixed. When the loan advances will cease, the repayments will start. This is a commendable alternative when a large quantity of cash is required. It is believed that reverse mortgages are quite safe. It allows you to continue to be the owner of the property. As long as the borrower stays in that property, he does not have to repay back the loan. The mortgage loans in the case of reverse mortgage have to be paid only when the borrower sells the property, shift his/her residing place permanently, or die. When you want to sell the property, if the total value of debt is less than the total value of the property, the difference in amount is handed as cash to the one who has borrowed the loan. Thus, reverse mortgage is secure and safe.
Even though reverse mortgage has some inherent advantages, there are some disadvantages too. By deciding on reverse mortgage, you diminish the equity worth of your house and real estate. When the borrower dies, the property will be sold to recuperate the loan balance. Thus, it is essential to consider the advantages and disadvantages of reverse mortgage before opting for it.
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