With a normal mortgage, you, the borrower, pays money to the lender company. However with a reverse mortgage, equity rich, senior citizen home owners can make use of the value of their home by taking a loan against their current mortgage
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What is reverse mortgage?
With a normal mortgage, you, the borrower, pays money to the lender company. However with a reverse mortgage, equity rich, senior citizen home owners can make use of the value of their home by taking a loan against their current mortgage. A reverse mortgage is a fantastic service that senior citizens can take advantage of to supplement their income.
How do I qualify for a reverse mortgage?
As mentioned, senior citizenship is the first requirement. To qualify for a reverse mortgage, you need to be 62 years of age. Its also vital that you have a high home equity. In other words, you need to have paid off all, or a large percentage of your home’s value. This allows the lender a certain amount of confidence in the fact that when your house gets sold or when you pass away, they will be able to get their money back.
How does it work?
As you’re paying off your home mortgage, you’re getting more and more ownership of your house until eventually you’ve paid if off entirely and you get the title to that house. That amount of ownership that you’re acquiring is called your home equity. As a senior citizen of 62 years of age or older, you qualify for a reverse mortgage if your home equity is above a certain percentage. With this large equity, your house is a major asset worth a large amount of money. This money and the value of your property forms the security for a reverse mortgage loan. You can apply to your mortgage company for a reverse mortgage. A successful application can be paid out in monthly installments or in a bulk sum.
A reverse mortgage is naturally very helpful to senior citizens who need to supplement their income after retirement.
Have a look at our resources on mortgage interest rates for a greater insight into mortgage interest rates.