What is Reverse Mortgage
10th December: What exactly is reverse mortgage is a question that pops up in many minds especially when we are talking about home loans.
Let us see what it is all about.
What is reverse mortgage—Reverse mortgage is defined as a category of mortgage in which any homeowner is allowed to borrow funds against the value of the house owned. In this case, the borrower is not required to repay the mortgage. So, repayment of the mortgage is needed either when the house in sold or in case of death of the borrower of reverse mortgage.
A point worth notable here is that the amount of the loan does not exceed the home value over the lifespan of the loan.
Reverse mortgage-Best for retirees—The tool of reverse mortgage is perfectly suited to cater to the cash needs of the people in retirement. Reverse mortgage does not require its borrower to make any payments and this brings in an advantage for borrowers to tap the income provided by a reverse mortgage for their retirement. It is a sort of blessing in the form of cash to elderly owners of homes who are cash-starved.
So, reverse mortgage provides a flowing stream of cash at specific periodicals while retaining the house ownership for retired people. It offers the retiree homeowners the facility of living a comfortable life but without the need for selling off their property.
The only word of caution before selecting any particular option of reverse mortgage is to consider various pros and cons carefully including upfront costs etc. Doing so will ensure best bargains in the times to come.
Features of Reverse mortgage—
- Offers a steady flow of cash for life time or for fifteen years;
- Ensures home ownership to the borrower of reverse mortgage;
- No assessing of credit worthiness as well as repaying capability in case of reverse mortgage;
- Option of drawing the borrowed amount either as a lump sum or in terms of fixed monthly payments for a specified period/duration of stay in the house/line of credit, or combination of the mentioned conditions.
- Lender must revalue the home after five years in order to make adjustment in the quantum of amount.
Applying for reverse mortgage—
- Take a decision to pledge your home for reverse mortgage;
- Approaching a bank for reverse mortgage;
- Filling up required documents/form;
- Providing financial and personal details including property, legal heirs etc.
- Ownership proof, property documents and proof that the house being pledged is owned by you.