A reverse mortgage is a type of loan that lets homeowners aging 62 or more to use their equity to generate tax free income while living in their house or applying for a new mortgage payment. As a matter of fact, this loan is exactly what the title suggests, it is a reverse of a regular mortgage.
How is it different from a regular mortgage?
In a standard mortgage, you make monthly payments to the lender to pay back the loan which the lender lent to you in the first place. This repayment includes interest that the lender charges you for the loan. When it comes to reverse mortgage, the situation is quite the opposite, the lender pays you on a monthly basis. But in both the mortgages, the house is used as the collateral to secure the loan.
Do I need to pay on a monthly basis to the lender?
There are no monthly payments due in this loan and it is repaid when you move, sell the home, or pass away, or ownership tends to change hands otherwise. You will still have to continue to pay the property taxes and insurance payments.
What are the factors that determine the amount of reverse mortgage?
There are many factors like the value of the home you live in, yours and your co-borrower’s age, existing interest rates, and any lending restrictions that are deemed standard for your geographic locality. The older you are, the more precious the home, the larger the loan amount given to you.
What is reverse mortgage used for?
The money from the reverse mortgage can be used for any purpose, it is totally at you’re your discretion. Many of the borrowers use it for repairs or modifications, health care expenses, settling other mortgages or a long vacation. These loans are available for almost any property type. Get in touch with Jumbo Loan for more.
Can I receive a lump sum from the reverse mortgage?
You can choose how you want to receive these payments, as lump sum, on a monthly basis or as a line of credit. The latter is the most famous, but 60 percent opt for the lump sum at the time of selecting the receiving method of the funds.
What will happen if I decide to sell away my house?
If you are selling away your home and the proceeds are more than the mortgage, the balance will belong to you or your heirs.