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Understanding Reverse Mortgages
Author David Schneider | Nov 14,2007
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A reverse mortgage is a mortgage product that is designed for senior citizens who are over 62 years of age. Unlike a traditional mortgage where you have a monthly payment due to your lender, a reverse mortgage doesn’t require a monthly payment. Instead, the balance of the loan is due when you sell your home or pass away. This makes reverse mortgages an affordable way to generate some income to cover your monthly expenses, medical care, home health care or recreation expenses.
How to Qualify for a Reverse Mortgage
The qualification process for a reverse mortgage is unique. It is not like qualifying for a traditional mortgage. First of all your credit is not really taken into consideration when processing your loan application, however, bankruptcies that are “in-process” can slow down your application’s processing. Next, your income is not taken into consideration when processing your reverse mortgage application, unless you are applying through a non-profit organization.
The factors that are looked at when approving your reverse mortgage application are your age, the value of your home and the amount of equity you have in your home. Generally to qualify for a reverse mortgage you have to be 62 or older, you must have at home equity to home value ratio of at least 75 percent and your home has to be worth the same amount or more than what you want to borrow. Finally, if you apply for a reverse mortgage through a special program, then you will have additional qualifications to meet which may include income limits and reverse mortgage counseling requirements.
How a Reverse Mortgage Works
A reverse mortgage is fairly simply to understand. Once you are qualified for a reverse mortgage you will have the option of either receiving a lump sum payment or receiving monthly stipends. Some reverse mortgages also allow you to withdraw money from a special account as you need it. During the life of the reverse mortgage you don’t have to make a payment, however, if you sell your home then you have to payoff the balance on your loan. Most reverse mortgages are paid off after the homeowner has passed away. In this case the balance of the mortgage is paid by the homeowner’s estate.
A reverse mortgage is a mortgage product that is designed for senior citizens who are over 62 years of age. Unlike a traditional mortgage where you have a monthly payment due to your lender, a reverse mortgage doesn’t require a monthly payment. Instead, the balance of the loan is due when you sell your home or pass away. This makes reverse mortgages an affordable way to generate some income to cover your monthly expenses, medical care, home health care or recreation expenses.
How to Qualify for a Reverse Mortgage
The qualification process for a reverse mortgage is unique. It is not like qualifying for a traditional mortgage. First of all your credit is not really taken into consideration when processing your loan application, however, bankruptcies that are “in-process” can slow down your application’s processing. Next, your income is not taken into consideration when processing your reverse mortgage application, unless you are applying through a non-profit organization.
The factors that are looked at when approving your reverse mortgage application are your age, the value of your home and the amount of equity you have in your home. Generally to qualify for a reverse mortgage you have to be 62 or older, you must have at home equity to home value ratio of at least 75 percent and your home has to be worth the same amount or more than what you want to borrow. Finally, if you apply for a reverse mortgage through a special program, then you will have additional qualifications to meet which may include income limits and reverse mortgage counseling requirements.
How a Reverse Mortgage Works
A reverse mortgage is fairly simply to understand. Once you are qualified for a reverse mortgage you will have the option of either receiving a lump sum payment or receiving monthly stipends. Some reverse mortgages also allow you to withdraw money from a special account as you need it. During the life of the reverse mortgage you don’t have to make a payment, however, if you sell your home then you have to payoff the balance on your loan. Most reverse mortgages are paid off after the homeowner has passed away. In this case the balance of the mortgage is paid by the homeowner’s estate. |
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