A reverse mortgage can be a boon to the individuals who are more than 60 years of age. It is a way to turn the equity in your home into cash. First of all, it is important to know what it means and how it works. So, here is a brief to answer all your questions.
What is reverse mortgage?
A reverse mortgage is a loan that is provided to the senior citizens, allowing them to convert their home equity into cash without making monthly payments to repay the loan.
How does it work?
In a normal home loan, you pay a monthly amount at a certain interest rate. With each payment, your equity goes up and the loan goes down. A reverse mortgage is a similar type of loan, the only difference is that it works in the opposite way. In a senior reverse mortgage, the equity goes on decreasing and the loan keeps on increasing. The cash may be paid to you in more than one ways, such as:
- All at once
- Regular monthly payments
- Payment according to your need
With the ownership still in hand, the homeowner can receive the cash in whatever way they like. The maximum amount that the homeowner can avail cannot exceed the value of the house. Eventually, it needs to be paid back along with the interest. The repayment occurs when the last owner of the house either dies, sells home, or moves somewhere else.
Eligibility criteria for a senior reverse mortgage
- The age of the individual must be above 62.
- The homeowner should own their own home.
The senior reverse mortgage is provided by the private institutions as well as the government.
Benefits of senior reverse mortgage
- No need to leave your home. You can live there as long as you want.
- No need of any income to qualify for the loan.
- The money can be used for anything you want.
- The funds received from a senior reverse mortgage are usually tax deductible.