A reverse mortgage is a unique type of loan for seniors, and while it is not the best type of loan for all seniors, it can be a good option for some. If you are a senior, own a house, and need cash, this could be a good route to pursue. Before you pursue it, though, you should understand the following three vital aspects about these loans.
They Do Not Require Payments
The one great quality you will find with a reverse mortgage is that you will not have to repay it in the form of payments. This is virtually the only type of loan you can get that will not require regular payments, and this is the one factor that makes these loans so appealing to seniors. If you are in a position where you need money just to live, this would be a great option. It would offer you the money you need without requiring that you now have an extra payment each month for it.
You will eventually repay this loan, though, but this will not happen until you pass away and your family sells your house or until you move out of your house and sell it. The only time it is repaid is after the sale of the house.
They Are Based on Equity
The second vital aspect to understand about a reverse mortgage is that it is based on the equity you have in your house. You do not have to own your house completely outright, but you will need to have equity in it. The amount you can borrow is based on a percentage of the equity you have. This percentage varies, so you would need to ask a lender about it.
They Provide a Way for Seniors to Stay Living at Home with Enough Cash for Living Expenses
The final aspect of a reverse mortgage that is essential to know is why seniors get these. The most common reason for a senior to take a reverse mortgage is simply to have cash on hand to use for basic living expenses. You can use this money to pay your bills, buy groceries, or pay for property taxes. If you do not have enough retirement income, this is the ideal way to have a way to pay for things.
Knowing these three factors may help you determine if you should pursue a reverse mortgage at this time in your life. If you are still unsure and have more questions, talk to a bank or lender that offers reverse mortgage loans.Share