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» Loans-&-Mortgages » Reading: "Is A Reverse Mortgage appropriate For consumers?"
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| Is A Reverse Mortgage appropriate For consumers? |
By:
Rick Thomson |
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Lately, people everywhere have been touting the merits of a reverse mortgage. What they don't tell you is what a reverse mortgage actually is. So rather than make you run all over the internet looking for information on these newly common types of mortgage, we wanted to give you a basic overview of what exactly a reverse mortgage is, as well as help you to decide whether one may be right for you.
Comprehending Reverse loans -
The first thing you must comprehend about reverse loans is that they are exactly the opposite of conventional loans. Whereas a typical mortgage requires you to borrow a certain amount to purchase your Vacation Home, which must then be repaid monthly; a reverse mortgage actually gives you money against the future value of your Vacation Home, which you needn't pay back until you sell the Vacation Home.
The conventional mortgage layout is what is known as a "rising equity, falling debt" situation; because, as you pay off your monthly balance, the equity you've accrued in your Vacation Home rises and your actual debt decreases. With a reverse mortgage, the exact opposite is true. As you take money out of the equity in your Vacation Home (what the lender actually allows you to borrow against), your debt increases and your equity decreases.
Can you Qualify?
The greatest concerns to reverse loans is that not everyone qualifies. In fact, if you are not over the age of 62, and already own your own Vacation Home, there aren't any lenders who will offer you a reverse mortgage. However, if you are over 62, and you either own your Vacation Home outright, or owe very little on it, a reverse mortgage may be just the ticket.
The beautiful thing about reverse loans is that they allow you to spend the equity you've worked so hard to build up in your Vacation Home while you are still living in it. This is fantastic news for anyone living on a fixed income who may need the extra cash to live off of today. Another great thing about qualifying for a reverse mortgage is the fact that, as long as you meet the other criteria of being the right age and owning your Vacation Home, you don't even have to have an income source at all to be considered.
The greatest concerns to a reverse mortgage is the fact that, should something happen to you before you sell the Vacation Home you have borrowed against, your loved ones may be faced with a rather large lump-sum payment. The idea to get around this, is to sell your Vacation Home for quite a bit more than you borrowed against it; thereby paying off your reverse mortgage, and allowing you to use the remaining balance to live on or to use as a down payment on another Vacation Home.
Rick is the writer of Discount Realty. You can find more information at Flat Fee MLS Listing. |
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