How Use A Reverse Mortgage.

Written By: Ray M. Mccullum on February 11, 2010 No Comment

There is a lot of mystery surrounding the reverse home loans, and, sad to say, most of the information available is published by companies who are trying to sell them. Try to get unbiased information, from a government site, for example, instead of listening to lender’s hype.

The first question for the borrower is What is a Reverse Mortgage? A special type of home loan was designed by the United States Housing Department which would help homeowners over 62 take advantage of the equity in their homes. What follows is that the equity in the house is converted to cash for the homeowners. The difference is that no repayment is required until the home is no longer the primary residence-as a rule when the house is sold.

Once the houseis sold, the money is used to pay off the loan. Of course, only the amount between what is now owed on the home and the market value may be borrowed.

Homeowners over 62 may be asset rich in that they own a home, but cash poor, and now they can use the house to pay for things like living expenses or medical bills. For many older people, who would not be eligible for a new refinancing or equity line of credit because of income limitations, it is an ideal situation.

But as wonderful as they sound, be sure they are the best instrument for you before you opt for a reverse mortgage instead of a traditional one.

Reverse mortgages typically require non recourse insurance, which covers the lender in case the borrower collects more in payments than is able to be recovered when the home is sold. There will also be the traditional closing costs.

These costs mean that it is important to thoroughly understand this kind of a loan. The homeowner should live in the home for quite a few years to make all of the additional costs of the mortgage worthwhile.

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