All About Reverse Mortgages
Are you looking for more information about reverse mortgages? You have come to the right place. A reverse mortgage is actually a secured loan, normally secured by a home, which allows the lender to access the owner’s unencumbered property value. These loans are usually marketed to senior homeowners and tend to not require ongoing monthly payments. A homeowner can borrow against the equity in his or her home and receive either a lump sum line of credit, or monthly payments depending on the specific loan agreement. In this article I will explain all about reverse mortgages and give you an idea as to what you can do with this type of loan.
There are many advantages associated with reverse mortgages, but there are also some disadvantages. This type of loan can be very profitable for the lender when used properly, but if used incorrectly it can be very detrimental. Basically the lender wants to provide a housing asset to their client. However, if the house value drops, then the lender may lose the entire interest income from the house.
As mentioned above, there are two types of reverse mortgages, but there are other names for them as well. For instance, the homeowner can also call the equity of the second home. In this case, the home is used to qualify for the mortgage. However, it is necessary that the homeowner to provide the lender with information on where they intend to live for the next five years. Usually the lender will want to see a year plus of tax returns.
The second type of reverse mortgages involves selling the homeowner’s existing home. When homeowners apply for a reverse mortgage, they must list their home as their primary residence. This house must also meet all of the lending requirements. If the homeowner does not live in the home anymore, then they lose their equity. They may still be able to stay in the home and use the equity to pay off the mortgage in five years. If the homeowner moves, then the equity is gone and they have to start all over again with a new mortgage.
Homeowners who get these reverse mortgages typically need to have a good credit rating and have at least sold their home in the past two years. These mortgages are popular among retirees. The monthly payments are usually affordable and the homeowner gets to choose which debts they would like to pay off first; the mortgage, home equity or credit cards.
One thing that homeowners like about reverse mortgages is that they are tax deductible. This means the additional interest paid on the loan will be deductible from the taxes. The homeowners do not have to pay the capital gains tax either. These loans are very popular in rural areas because they provide flexibility to the homeowner who wishes to stay in their home longer.
There are many advantages of the reverse mortgages and the monthly payments can vary. Some borrowers may pay as low as fifteen percent. Others may pay as much as thirty percent. In both cases, the payments are lower than the house payment that the homeowner would make if they had to move out of the home.
Another advantage of the reverse mortgages is that it allows homeowners to build up the equity in their home. After a homeowner makes the regular payments, they can borrow against the equity. When the equity builds up, homeowners can borrow against the equity for more than the house is worth. The interest rates are lower than those associated with the traditional mortgage.
Thank you to Mortgage for Seniors who helped contribute to this article!