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Reverse Mortgage: Details on How It Works

 

One of the major requirements for getting a reverse mortgage is being at least sixty two years of age because these are only for seniors above age 62. While they allow people a way to cash out some of their equity, they are not a cash out mortgage refinance loan. If you have a reverse mortgage, you do not have to pay the loan back unless you don’t meet all the terms of the loan. In order to get a reverse mortgage, there are some things you will have to do to qualify. 

 

The requirements for a reverse mortgage are that you much be 62 or older, you have to own your home or be very close to doing so, you have to plan to live in the home you are getting the mortgage for, and you have to get consumer information from an approved source first. These types of mortgages are not the way to go for every senior out there, but if you fit all the requirements and have talked to a lender and feel that it is the way to go, then go for it! 

 

A reverse mortgage has that name because instead of you making monthly payments to a financial institution for a home mortgage or mortgage refinancing, the lender actually makes monthly payments to you! The payments can be made in different ways, such as a lump sum, periodic advances, or monthly payments. 

 

While the house is the collateral for these payments, the borrower does not need to have an income in order to qualify for a reverse mortgage. If you have a bad credit mortgage, rest assured that the new loan will not be one as well. When you sell the house, it all gets paid off by the sale of the house. If the sale price is lower than the loan and interest combined, it is still considered paid off. HUD would pay the difference to the financial institution, as this would be considered a short sale. If you pass away during the term of the loan, your beneficiaries will not be stuck paying the loan back because the bank will sell it and profit from that sale. 

 

Once you understand everything about a reverse mortgage, you will better be able to decide if this is the right thing to do. With the way social security is diminishing, you might want to look into it as you approach retirement.