Reverse mortgage – A home loan option for the seniors
Many a times, it had been noticed that senior citizens cannot easily qualify for home loans. Their low income or other financial issues make them ineligible for the normal traditional loans. In such a situation, the option of reverse mortgage is of great help to them. With this loan option, the senior citizen can easily purchase a property or tap the equity that they have built on their property.
What is reverse mortgage all about?
Well, a reverse mortgage is a home loan that will provide the senior citizen with a steady and tax-free income by helping them cashing out the equity that they have in the property. This loan option helps the senior citizen to lead their life in a self-dependent way as the money that they get from this loan becomes their source of income.
How does a reverse equity mortgage work?
This loan process is totally different to that of a normal mortgage where you have to make a regular monthly payment to the lender. When a senior citizen applies for a reverse mortgage and is able to get it, he won’t be liable for making regular monthly payments to the lender. In this loan process, it is the lender who makes the payment to the borrower as per the chosen payment option. But, as the borrower does not make the monthly payment, the debt continues to accumulate and the equity in the property gets reduced.
How can reverse mortgage payments be received?
A senior citizen can claim the reverse mortgage payments in mainly three different ways. Let’s take a look at them:
· Regular monthly payment: The senior citizens may receive their reverse mortgage proceeds through regular monthly payments. The amount will get deposited in their bank accounts.
· One time lump sum payment: If required, the senior citizen can even opt for the option of one time lump sum payment.
· Receive cash through credit: The seniors can withdraw the money or the equity from their property through credit line when they are in need of it.
How can reverse mortgage be paid off?
While a senior citizen lives in the property and maintains it, he/she won’t be liable for paying anything to the lender. The loan may become due in case of the death of the borrower. It may also become due if the property is not maintained or if the senior citizen leaves the property. The lender may sell off the property to recover the debt. However, the heirs can even refinance and pay off the reverse mortgage to save the property.