About three decades ago, reverse mortgage was introduced. It is specifically meant for senior citizens. Throughout the years, several amendments have taken place and allowed older people to live a fuller life. But what exactly does reverse mortgage mean?The objective of reverse mortgage is to obtain money through the equity of a senior’s home. However, only senior citizens who own a home can avail of this type of mortgage. Unlike other loans, this does not require any monthly payments. Payments will only be made after the closure of the loan. In addition, if a senior does have an outstanding mortgage, it must be settled using the reverse mortgage.
Requirements of Reverse Mortgage
The mortgagor or the borrower must be a senior citizen and must own a home. The equity of the home is where the money will be taken, which means that the mortgagor can obtain an amount from his property or equity. What’s nice about this loan is that a mortgage provider doesn’t need to take a look at your monthly income or credit rating as long as he has equity.
Just like what I’ve said earlier, the reverse mortgage will only have to be paid if the loan arrives to a closure and closure of the loan takes place when a senior migrates, sells his home, or dies. If this happens, the home will be sold and proceeds will be used to pay for the loan. In case the proceeds are not enough to pay off the loan, the mortgage insurance is made to shoulder the deficit.
Mortgage refinancing can also be availed to seniors who have obtained this type of mortgage. This means that a senior can get another reverse mortgage to pay off the first obtained reverse mortgage. This may benefit seniors if their home has greatly appreciated. For example, if a decade has passed after you’ve obtained your initial reverse mortgage, the equity of your property may have already appreciated tremendously and this makes it possible for you to get another loan of this type. You just need to pay off your first mortgage first then acquire another loan, which is now much bigger.
Importance of Counselling
Reverse mortgage is an amazing loan for seniors, but unfortunately, there are some unscrupulous companies that take advantage of seniors. To avoid getting scammed, a senior has to have a mortgage counsellor when signing mortgage contracts.