What Is A Reverse Mortgage?
A reverse mortgage is basically a mortgage loan, normally secured by a home, that allows the homeowner to access the equity in his or her home in return for regular monthly payments. In the past, reverse mortgages were restricted to senior citizens; however, these days they are more readily available for seniors who want to preserve their independence. The loans typically are promoted to younger homeowners and generally do not require mortgage payments to be made.
Reverse mortgages can be a good option for seniors who may not have the equity built up in their homes to make the payments necessary to retire on it. But if you are already past retirement age, it is important to understand what a reverse mortgage can do for you. Here's a closer look at what this type of loan entails.
A reverse mortgage, also called an ARM, is a type of mortgage that is financed through the equity in the home. This loan is the same as an interest-only mortgage, which means that the amount of money that is loaned is interest only. As such, this type of loan is not a "traditional" home loan. When your loan is funded with equity in your home, your monthly payment will be lower than those on a traditional home loan.
As previously stated, a reverse mortgage is typically designed for seniors who may no longer own their home. Some people choose to purchase a home that is under foreclosure, but others simply choose not to sell. If you are approaching retirement, you may find that the value of your home has decreased significantly and may not be worth as much as it once was. In this case, you may consider getting a reverse mortgage loan to get you out of a potentially costly situation. This is an excellent choice because you don't need to leave your home or your children in a house that you are not able to live in.
Another benefit of a reverse mortgage is that it allows you to live independently and still maintain a level of income. Most seniors can qualify for a loan even if they are already receiving social security or Medicare benefits. The payments and medical expenses related to your age can be deducted from your income tax returns and used toward your mortgage. This way, you can have the money you need to pay your bills, pay down other debts, and possibly even save up some cash in case of an emergency.
Before you decide to get a reverse mortgage, it's important to fully understand all of its implications and what is involved in obtaining one. If you are considering obtaining one, make sure you understand the fine print of any contract you are interested in. In some cases, your lender may require you to prove to them that you currently have a steady source of income, such as unemployment, to qualify for the loan.
You'll also need to understand the terms and conditions of the loan itself, including the amount of the interest rate, the interest rate and any fees you will be responsible for. It's also important to find out what the closing costs are for the loan and what you will pay for them.
In short, a reverse mortgage offers many advantages to seniors. It can help them stay in their homes and not rely on social security or Medicare to pay for their monthly payments. It can help them pay down debt or even start a new life with a little bit of financial independence. It can also give them the flexibility to live independently and enjoy the freedom and flexibility.