What Everybody Ought to Know About Reverse Mortgages

What exactly is a reverse mortgage? It is a type of home loan that allows retirees to use the equity in their home while still living in the property. This can be a viable tool to increase cash flow for a senior. Before taking out a reverse mortgage it is important to know the facts. In this article we will explain some of the key characteristics of a reverse mortgage.

First, let’s explore the way a reverse mortgage works. As we saw earlier, it is a product that allows the use of equity in a retiree’s home while still living in it. Furthermore, the mortgage holder won’t have to increase their monthly budget by taking on additional mortgage payments, as with a conventional home equity loan. The reverse mortgage loan is tax-free, and only needs to be paid upon the borrower’s death or disposition of the property.

At this time, it is important to note the reverse mortgage loan must be fully repaid, including all applicable interest charges. Another important consideration is the costs associated with this product. Keep in mind that the amount of fees charged to the borrower can vary greatly depending on the lending institution. A proper comparison is therefore important to make sure you get the most affordable product. Fees can include closing costs, insurance, and monthly account keeping fees.

People who take out reverse mortgages should not forget that they will still be responsible for paying for the upkeep of their property. Holders of reverse mortgages should also do some research into whether the product will affect their ability to obtain social security benefits. It is likely that the cash received from the reverse mortgage will not affect any entitlement to social security benefits.

It is also wise to remember that the upkeep of the home is an important factor when applying for a reverse mortgage. Obviously, the home must be structurally sound and well maintained. The amount of equity that you will be allowed to draw down will depend on several factors such as your age and how much equity there is in the property. As a general rule, the older you are, the more you can expect to receive.

The borrower can elect to receive payments either as an ongoing fixed monthly payment, a lump sum payment, or some sort of line of credit. Also you can combine one or more of these methods of receiving payment. By far the most popular of these options is the line of credit. This method offers the greatest flexibility and allows you to draw down the funds as and when required.

So there you have it, the reverse mortgage explained. This can definitely be a good planning tool for an older person to be able to supplement their retirement savings, but this is a complicated subject so please seek professional help to make sure your interests are being protected.

If you need any more information contact an independent mortgage broker. An independent mortgage broker can advise on the whole of the reverse mortgage market and help you to apply for a loan if you decide to proceed.

Author Bio: Speak to a qualified Mortgage Broker at http://www.ukmortgagesource.co.uk and secure the right home loan for your needs http://www.ukmortgagesource.co.uk

Category: Finances
Keywords: mortgage broker, mortgage brokers

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