The Benefits of Getting a Reverse Mortgage

Reverse Mortgage
A reverse mortgage is also referred to as a lifetime mortgage in the United Kingdom. In the United States, a reverse mortgage is a mortgage loan which is available to seniors who are 62 and over. A reverse mortgage is used to discharge the home equity in the property as one lump sum or in multiple payments to the homeowner. The homeowner's obligation to repay the loan is postponed until the owner dies, the home is sold, or the homeowner is placed into senior care.

A Typical Mortgage vs. a Reverse Mortgage
In a typical mortgage situation, the homeowner makes a monthly amortized payment to the lender and the equity within his or her property increases with each payment. Typically after the end of the term which is usually 30 years, the mortgage has been paid in full and the property is released from the lender to the homeowner.

With a reverse mortgage, the homeowner does not make any payments and all interest is added to the lien on the property. In addition, if the owner receives monthly payments, the balance on the property increases monthly.

If a property has increased in value after a reverse mortgage is taken out, it is also possible to obtain a second (or third) reverse mortgage as well in excess of the increased equity in the home. But in various countries (counting the United States), a reverse mortgage is allowed only to be the first and only mortgage on the property.

Reverse Mortgage Requirements
Qualifications for a reverse mortgage in the United States require that the borrower be at least 62 years of age. There are no minimum income or credit requirements, however other requirements do apply. Homeowners should talk to a professional Mortgage Loan Officer to be sure that they meet the criteria for the loan.

Nearly all money attained in a reverse mortgages can be used for any purpose. Nevertheless, the borrower is required to pay off any existing mortgage(s) with the proceeds received from the reverse mortgage. If a potential reverse mortgage borrower has a pending bankruptcy which has not been finalized may, it could possibly slow down the approval process.

There are some dwellings, such as lower-value mobile homes which do not qualify for a reverse mortgage. Reverse Mortgage applicants must also partake in free financial counseling from a source which is approved by the Department of Housing and Urban Development (HUD). The counseling is required for the borrowers benefit as a safeguard for the borrower and his/her family to make certain the borrower fully understands a reverse mortgage and how it is obtained.