The word “mortgage” usually brings to mind years of payments to a financial institution, until the full payment is accomplished. However, not all mortgages operate the same way. Hence, this blogpost welcomes the reader into the world of reverse mortgage.
Has to do with home equity
Also known as home equity conversion loans, reverse mortgages indeed are determined by the value of home equity. Reverse mortgages are available for homeowners 62 and older. To take out a reverse mortgage, a homeowner borrows against his or her home equity—i.e. based on the value of the home. Reverse mortgages are great in that they can allow homeowners to take advantage of a lump sum by borrowing against the equity (which can be a source of immediate income when times are tough or a steady stream of income). Although the homeowner is not required to make monthly mortgage payments, the full repayment is achieved at loan maturity.
When is loan maturity achieved?
Loan maturity can occur when the homeowner sells the title of his or her home or moves out of the home (for example, to move into his or her child’s home). Unless the homeowner repays the mortgage by selling the home—the net amount from which would be used for repaying the mortgage loan—the homeowner’s heir(s) must repay the mortgage. Loan maturity can also occur when the homeowner dies. Creditors have the motivation to not collect monthly payments since the loan balance increases.
Caveats
When one only has the facts above, a reverse mortgage could sound too good to be true. However, paying homeowner’s insurance and property taxes are still requirements for a reverse mortgage. (This is why wise financial planning is crucial for avoiding foreclosure.) Moreover, in certain instances, a widow or a widower can lose a home; therefore, reading the fine print is key for benefiting from a reverse mortgage. Another major caveat is that many scammers target the elderly in exchange for a fake reverse mortgage.
Conclusion
So there you have it. Reverse mortgages can be tricky to navigate, which is why you need a professional on your side. To benefit as much as you can from this “home equity conversion loan,” simply enlist the help of American Mortgage Resource, Inc. today.
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