Despite several big-name banks pulling the product from their respective home loan offerings, reverse mortgages remain a popular mortgage choice among homeowners aged 62 or over.
A reverse mortgage is exactly what it sounds like -- a mortgage in reverse. Rather than borrow a fixed amount of money then pay that loan balance down to zero as with a "forward" mortgage, a reverse mortgage starts at a given loan balance and works its way up as scheduled payments are added to the existing loan balance.
This 4-minute piece from NBC's The Today Show highlights a few pros and cons of reverse mortgages, and the reasons why you may want to consider one, including :
- No mortgage payments are ever due on your home
- There is no credit check required for a reverse mortgage
- There is no income requirement to qualify for a reverse mortgage
There are some basic qualification standards for the reverse mortgage program including a requirement that all borrowers on title must be 62 years of age or older; and that the subject property be a primary residence. Loan fees can also be higher than with a conventional-type mortgage.
If you meet the qualification standards, though, with a reverse mortgage, you have flexibility in how your home equity is distributed to you. You can receive a lump-sum payment, elect for monthly installments over time, create a line of credit, or a combination of all three.
Like all mortgages, reverse mortgages are complex instruments. That's one reason why all reverse mortgage borrowers are required to attend counseling -- the government wants you to be certain that you understand the nuances of the reverse mortgage program.
Your lender will want you to understand the program, too.
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ReplyDeletereverse mortgage pros and cons
The article has explained the various aspects of a reverse mortgage loan in a very simple manner. The eligibility criteria, the benefits and the drawbacks of a reverse mortgage loan have been explained in a nice way. Here it is to be noted that a reverse mortgage loan is targeted to the old persons in the country whose age is 62 or above. This loan can supplement their paltry retirement funds and can help them maintain a higher standard of living. Here, the homeowners do not have to make monthly mortgage payments, instead payment is made by the lender to the homeowner. In case of default by the lender, the Department of Housing and Urban Development comes forward to the rescue of the homeowners.
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