Table Of Contents:
- What exactly is a reverse mortgage?
- What is the Process of a Reverse Mortgage?
- The Benefits of a Reverse Mortgage
What exactly is a Reverse Mortgage?
Like a standard mortgage, a reverse mortgage enables homeowners to borrow money while using their house as collateral. When you take out a reverse mortgage loan, the title to your property remains in your name, just as with a standard mortgage. However, borrowers do not make monthly mortgage payments with a reverse mortgage loan, unlike a typical mortgage. When the borrower no longer resides in residence, the loan is repaid. Each month, interest and fees are added to the loan amount, which causes it to rise. Homeowners who take out a reverse mortgage must pay property taxes and homeowners insurance, utilize the property as their primary residence, and maintain the house in excellent shape.
What is the Process of a Reverse Mortgage?
When you have a standard mortgage, you make monthly payments to the lender to purchase your property over time. A reverse mortgage is a loan in which the lender pays you back. Reverse mortgages take a portion of your home’s value and turn it into payments to you – essentially, an advance payment on your home equity. The money you get is normally tax-free. In general, you are not required to repay the money for as long as you reside in your house. You, your spouse, or your estate would repay the loan if you died, sold your house, or moved out. It is sometimes necessary to sell the house in order to repay the debt.
Single-purpose reverse mortgages – issued by certain state and local government organizations as well as non-profits; proprietary reverse mortgages – private loans; and federally-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs) – are the three types of reverse mortgages.