Understanding the History and Basics of Reverse Mortgage

The chances of you coming across the term “reverse mortgage” may be high. However, do you knowwhat this term is and how it works? Not everyone has access to in-depth research on this subject matter. You may or may not find this area useful at the moment, depending on how close you are to retirement. Nevertheless, it is worth understanding this financial opportunity as it may come in handy for you or a close relative. A reverse mortgage is the financial safety net any retiree, who is also a homeowner, needs. 

Guest Post Collaboration with All Reverse Mortgage Inc.

How did the reverse mortgage emerge? You may ask. In 1961, Nelson Haynes of Deering Savings and Loans created this type of loan to help Nellie Young, a widow and wife to his high school football coach, stay indoors after the death of her husband. Stemming from Portland, Maine, this mortgage has helped millions of homeowners, 62 years and older, ever since then to meet various financial needs.

What Does A Reverse Mortgage Mean?

A reverse mortgage provides homeowners with the flexibility to take loans, using their homes as collaterals. Also known as home equity conversion loan, this unique type of loan gives retirees an extra source of income to meet varying needs, including the repayment of debts. Unlike other types of mortgage, a homeowner can defer repayment on a reverse mortgage as wished. The only time such an individual can pay back this mortgage is if there is a need to relocate and sell the home. However, there are clauses you need to understand. Inasmuch as a reverse mortgage loan offers flexibility on repayment, you need to meet up with other expenses, some of which includes catering to property taxes, insurance, and home maintenance. Failure to do so may lead to the termination of the mortgage and the foreclosure of the property. Besides, the interest on this loan accumulates over time. Hence, you should weigh your options before taking this loan.

How Can I Take A Reverse Mortgage?

On the brighter side, a reverse mortgage puts extra money into your pocket every month; this way, you do not have to worry about meeting your needs after retirement. You could invest part of the income you earn from this loan to generate returns that will assist with repayment. Home equity conversion loan can cover up existing mortgages as well. Here are some ways you can receive your loan:

• As a monthly payment provided that you reside in the home and keep up with other expenses. 

• As a lump sum; this helps individuals with vast immediate needs. • As a line of credit for individuals who may need to take a loan from time to time. 

• As a combination of two or all of the above-mentioned options. But first off, you must be 62 years and above and must have a property where you reside permanently. 

Once these requirements are in place, you can see an institution that provides FHA Home Equity Conversion Mortgage loans to find out how to proceed. This lender would evaluate your financial status and the value of your home using a reverse loan calculator tool to determine if you qualify for the loan. In detail, they will run through your credit score, current mortgage balance, and your home value, to determine the amount you are to borrow and available options for repayment. Are Reverse Mortgages Repayable? Of course, you are to repay a home equity conversion loan. However, you do not have to do so immediately. Homeowners can defer their payments until they decide to move out of the home. But, bear in mind that when it is due, you would have to pay back the initial loan and the interest it has accrued over time. In a situation where the money from the home sale is not enough to meet up with the loan, the lender will write off the outstanding debt.