What is a Reverse Mortgage?
When a borrower has a standard forward mortgage, he (or she) makes payments to the lender every month to repay his loan. With a reverse mortgage, the borrower gets a loan in which the lender pays him. Reverse mortgages allow the borrower to take part of the equity he has in his home and convert it into payments. Usually, the borrower doesn’t have to pay back the money for as long as he lives in his home. With a reverse mortgage the amount the borrower owes to the bank goes up as he receives payments. The homeowner has to be over the age of 62 and have enough equity in his home to cover the amount borrowed. This program is great for those who want to stay in their homes but don’t earn enough monthly to cover the expenses of living there. The debt is paid back when the home is sold.
- Qualification depends on the equity in the home and does not depend on the borrower’s credit.
- Income qualification is very lax, the borrower needs to ensure that he is able to meet the tax and insurance payments on property
- The borrower can receive a lump sum, equal monthly payments over a fixed period of time, a line of credit or a combination of these options.
- The borrower will never have to pay the lender more than the amount that he sells the house for, even if that amount is less than the amount owed on the reverse mortgage.