Introduction
Reverse mortgages derive their name from the fact that they are the opposite of ordinary house loans. The lender pays the borrower/home owner instead of the borrower paying the lender, as is the case in normal home loans. For one to qualify for a loan they must be senior citizens who are 62 years or older.
Step 1
Money paid i reverse mortgages are usually untaxed. The borrowers can do what they want with the money. One can use the cash for home repairs, to pay off debts and so on. Cash received from home loans are loan proceeds and do not affect one's social security or any other source of income. These are some of advantages of reverse mortgages.
Step 2
In the usual home loans, one faces foreclosure when they do not clear their debt. Reverse mortgages have no such provision. In the past, if the borrowers violated some terms of the agreement or lived too long, then they faced eviction from the house. Nowadays, borrowers can live as long as they like without displacement. Furthermore, they can pass on their homes to their heirs. However, if the owners do not live in the houses, fail to keep the homes in good condition or even do not pay reverse mortgages, they are liable to eviction.
Step 3
With reverse mortgages, there are no loan repayment requirements. The bank will only stand to benefit if the borrower sells the house or passes away. Borrowers are also required to have equity in their homes. The amount of equity that is given results from the age of the borrower, the location of the house and the interest rate charged. This shows the lenders how much they can lend out without demanding loan repayment.
Step 4
There are more merits than demerits associated with reverse mortgages. Unlike the usual home loans, one has no worries of foreclosure. One is also entitled to payment and they can choose how they want this arrangement i.e. lump sum payment or monthly payments and so on. These loans are a God sent since they enable the elderly to retire in peace.
Step 5
Mortgages reverse are loans just like any other so they have provisions for repayment. The normal home loans have repayment provisions through fixed payment periods. The only way to repay these loans to the elderly is if the owner decides to sell the house.
Tips
There are certain myths that have developed regarding these reverse mortgages. Some say that one's heir cannot inherit the homes, it is impossible to own a house through this kind of loan, one faces eviction if they live too long and that closing rates are extremely high. It is wise to shy away from such misguided information and seek expert advice. Just like any financial issue, loans need a professional approach. Those seeking home loans should consult mortgage reverse experts for an elaborate understanding of the system. However, it is undisputable these loans are full of benefits for the borrowers. In fact, there is no doubt that they serve to ease the burden of retirement for poor elderly individuals.
Sources and Citations
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