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Reverse Mortgage

Reverse mortgage also called as lifetime mortgage is a loan that is available only to senior citizens.  This mortgage is used to get the equity on a real property as lump sum or installments.  The obligation to repay the loan is delayed until the owner dies.  A reverse mortgage is comparable with the monthly pension scheme.  Even here the principal and interest are paid only with home owners’ equity. 

In a general mortgage, the home owner make his monthly installment payments to the lender and after the end of the term the mortgage is paid in full and the real estate property is released from the lender.  But, in case of reverse mortgage, there is no need to pay these installments and all the interest is added to the lien on the property.  Here, the owner will receive the payment from the mortgage company whether through lump sum payment or installment wise and then the debt on the property increase.

If the value of the property increased after availing the reverse mortgage, then there is a facility to opt for the second reverse mortgage. Reverse mortgages are very helpful to senior citizens to obtain a tax free cash flow. A reverse mortgage is an insured loan that offers no cash back, until you continue to live in your house.  There is a facility to access the equity on their real estate property

The eligible amount of money is determined basing on these factors

  • Appraisal value of the property after considering the repairs, fixings and existing     liens on the property

  • The present interest rate under the corresponding legislations

  • Depending on the age of the concerned person.  It is on the principle “The more     age, the more money he/she will receive

  • The mode of payment whether through lump sun, installments or the line of     credit.  Line of credit yields more money while lump sun amount is paid     immediately but with highest interest rates.

  • Location of the property and surroundings
  • Benefits of Reverse Mortgage

  • The main philosophy of a reverse mortgage is: A house can pay back for us.

  • A reverse mortgage helps to retain your ownership on the real property for life.     The balance equity is passed on to your successors.

  • Using the amount of a reverse mortgage is completely tax free.  One can use     this mortgage amount for home maintenance, home repairs, for clearing the     existing loans, credit card clearance, grand child education, travel and for health     care.

  • No pay back is required until you live in your house.

  • No income, medical or credit requirements.
  • Various types of reverse mortgages

    In general there are three types of reverse mortgages: 

  • Federal insured reverse mortgage
  • Lender insured reverse mortgage
  • Uninsured reverse mortgage

  • All these three types of mortgages depend on the types of house on which you are applying for mortgage loan.  For example: single family residence, condos, flats etc.
         
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