Reverse mortgage is a special type of mortgage that is availed by the senior people in order to release the property from home equity. Reverse mortgage is also known as lifetime mortgage in the UK. In the US, senior citizens of more than 62 years of age can have the reverse mortgage.
In other words it can also be said that the reverse mortgages actually help out the senior people in using the home equity in order to support the existing income. Reverse mortgages are the advance payments of loans without repayment obligation until and unless the homeowner sells the home, moves or dies.
According to the lifetime mortgage concept in the United Kingdom, the home owner is never under the obligation to repay the loan amount as long as he or she lives in the house. The lenders of reverse mortgage give out the cash as regular payment, lump sum, credit line or combinations.
The basic types of reverse mortgage in the United States of America are:
Federally Insured Reverse Mortgage
Single Purpose Reverse Mortgage
Proprietary Reverse Mortgage
The concept of reverse mortgage is different from that of the typical mortgages. In a simple mortgage, the borrower keeps making monthly payments until the entire loan is fully paid off. When the entire mortgage payment is paid off, the property of the borrower is then released from the lender. But in the case of reverse mortgage, the owner of the house is not under the obligation to make payments and all interest of the loan is then added to the property lien.
In the cases when the property value is increased after taking out the reverse mortgage, acquiring a second or third reverse mortgage on the home equity is possible. But according to certain rules of the countries like United States, the reverse mortgage has to be the only and first mortgage on the house property.
Some of the advantages of reverse mortgage enjoyed by the people are:
Maintain the ownership and title
No Monthly Mortgage Payments
Continue to live in the home
Freedom of using the extra money
Last Updated on : 1st July 2013