What are Reverse Mortgage and Its Advantages?
Reverse Mortgage: Reverse Mortgage is a type of mortgage where the loan amount is not repaid as long as the homeowner is still living inside the house. It is another way to get some money from your own home. The loan is available to homeowners who are 62 years or older that enables them to convert part of the equity in their home to cash. The product was conceived as a mean to help elderly people or retirees with limited income to use the accumulated wealth in their home to cover basic monthly living expenses and pay for their health care. It is just reverse or traditional mortgage where instead of making monthly payments to a lender the lender makes the payments to the borrowers. You are not required paying back the loan until the home is sold or otherwise vacated.
If you go for reverse mortgage it offers you a better financial security for your future and comparatively good lifestyle to enjoy. Payments in reverse mortgage can be made either by a lump sum, monthly for as long as the borrowers occupies the home, periodic advances through line of credit or it can be a combination of any of them.
Advantages of reverse mortgage
- Major benefit from reverse mortgage is income from reverse mortgage is not taxable
- With reverse mortgage your social security or medical benefits are not at risk at all.
- With reverse mortgage you can retain the full ownership of your home no matter what happens to your home. You retain all the benefits and responsibilities of your home ownership and you must continue to pay your property taxes, home owner insurances and of course you can sell your home any time you choose and receive 100% of any equity after the loan is repaid
- If you choose your reverse mortgage with Federal government then it is extremely safe and secure because the Federal government stands behind you and guarantees that you receive all of your scheduled payments and if you choose a line of credit on a reverse mortgage then there is no risk that your available line of credit will be withdrawn. Income
- Home owners can age in a familiar home without selling or moving elsewhere
- Homeowners can keep their house until they pass away, move or sell their house or reach the end of their loan term
- With reverse mortgage you can have both fixed or adjustable interest rates but most of the people prefer adjustable rates
- With the progressing age of home owner, the home equity also increases and thus the amount that can be borrowed is also increases
- Other major contrast of reverse mortgage with respect to other mortgage options is that it is as long as you live in your home you are not required to make payments on your reverse mortgage and if you have a bad credit score or fluctuating monthly income then also you can qualify for reverse mortgage.
Do I Need Good Credit for a Reverse Mortgage?
Different programs have different requirements, but most programs:
- require the youngest borrower to be at least 62 years old at the time the loan closes;
- will loan on owner-occupied single-family homes (some programs will also loan on 2-4 unit owner-occupied dwellings, federally approved condominiums, planned unit developments or manufactured homes on foundations);
- will not loan on mobile homes or cooperative apartments;
- require that your home is your principal residence, meaning you must live there more than half of each year;
- require that your home meets minimum FHA property standards;
- require that you pay off any existing mortgage or other liens against your home before getting the Reverse Mortgage, or use an immediate cash advance from the Reverse Mortgage to pay them off. (If you cannot pay off the existing mortgage or don't qualify for a large enough cash advance, you will not be able to get a Reverse Mortgage.)
The REVERSE MORTGAGE has almost no credit qualifications. Poor FICO scores and recent bankruptcy do not stop borrowers from being approved for a reverse mortgage. The only credit items than can disqualify a person from a reverse mortgage are unpaid federal debts.