Do you know that there are mortgages that you do not need to repay either as you continue living at your present location or, indeed, throughout your entire lifetime? Yes, there are. These types of home loans are known as reverse mortgages.
In a reverse mortgage, you borrow money from the equity of your home, but you pay nothing as long as the property remains under your possession. With reverse mortgages, you are able to secure money for making other investments. A reverse mortgage allows you to turn the value of your home to money that you may use for other purposes. And there are no monthly payments to be met.
There are different ways through which you may receive money from a reverse mortgage. For example, you may either get the whole amount of your reverse loan at a go, or you may receive stipulated monthly payments. You may also receive the money in the form of creditline account. In such a case, you only receive the required amount of money at times when you need it. Reverse mortgages are so flexible that you may instead opt for a combination of the various methods mentioned.
Whichever method you use to get money from a reverse mortgage, the common denominator is the fact that you will not be required to make any payment before you permanently move from the home or sell it. If you do none of these, you won’t make any payment until your death! Those who normally qualify for reverse mortgages are people who have reached the age of 62 and above.
When you take the conventional mortgages, you will need to go through strict pre-qualification processes. For example, your assets and income will be closely reviewed in order to verify whether you are in a position to pay back the loan. With reverse mortgages, this does not apply given that there are no monthly payments to be made. It is relatively simple to qualify for a reverse mortgage. You do not have to reach a given level of income since you will not be making any monthly payments. There is no risk of losing your home with reverse mortgages.
As much as it has many advantages, a reverse mortgage has its disadvantages too. You make no monthly payments but instead turn the value of your home to cash. This is not necessarily good as far as your home equity is concerned. As the name implies, things work out the opposite way with reverse mortgage. While the passage of time helps you to get out of your debt with other mortgages as you make monthly payments, with reverse mortgages, your debt actually rises with time. This in turn means that the equity of your home becomes less and less.