Reverse mortgages can be a great way for those who are retired to acquire money on the equity of their home without owing monthly payments. However, they can be quite confusing to those who do not know how they work. In reality, the workings of this type of mortgage are simple once you understand the basics.
The key fact that you should remember about this type of mortgage is that it has an age requirement. In order to qualify you must be over the age of sixty. If you are not there yet then you have other avenues you can try. This method is meant for those are of retirement age and have paid into their home over the years.
This also means that equity is a necessity to qualify. If you have no substantial equity in your home then this option is not right for you. You will likely find that the majority of choices require equity be built before they are optional.
If you meet those minimum requirements then you can apply for this mortgage. Once you have been approved you will be given a loan on your home. This is sometimes done in one lump payment and sometimes the homeowner has monthly payments made to them. Each situation and loan is different so you should find out which you are applying for.
Over the years interest will add up. You will not have the monthly payment a traditional loan has, but the interest is continuously added to the balance. At the time the borrower dies or sells the home the loan must be paid off. If it is not, the home becomes property of the lender.
This option is one way that retired people have of using the equity in their home to benefit them as they age. Some opt not to choose this alternative. Many do so as they believe it to be worthwhile. Talk with your lender to find out if reverse mortgages can benefit you if you meet the requirements to qualify.
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