Reverse Mortgages: The What, The Who And The How
There are different types of loan in the market. One of which is what we call reverse mortgage. Some people might think that this is similar to a traditional mortgage or home loan. The only similarity is that both are loans against a borrower's home. To understand this type of loan further, let us first discuss what a reverse mortgage really is.
What is a Reverse Mortgage Loan?
A borrower of this type of loan does not actually need to pay back the lending company as long as he/she still lives at the residence used as collateral. The loan amount will be based upon the home's equity and the age of the borrower. A borrower has the options to receive the funds in different terms - monthly payments, a lump sum, a line of credit, or a combination of these methods. You must take note that in reverse mortgage, you are not required to pay the loan back unless you sell your home, move out or die. One of the many advantages of having this kind of loan is that you can use the loan money without having to move out, rent or repay the loan each month.
Who can Apply?
You can apply if:
1. You are and any co-owner must be at least 62 years old.
2. You must own a home (this home should also be your primary residence).
One of the good things about a reverse mortgage is that you don't need to have an income to qualify. Your home must meet the U.S. Department of Housing and Urban Development (HUD) standards to qualify. If you own a trailer home or cooperative house, you can't apply for this kind of loan. Only single-family home, a one-unit to four-unit dwelling, a condominium unit or some other HUD-recognized dwelling unit are the only types of homes accepted.
How to Apply?
Let us now talk about how you can start applying for this specific loan.
1. Shop and Compare. You can use the internet to look for loan companies and compare their rates and fees. It is always a wise move to shop around so you can weigh your possible options. You can also ask people you know like your family members, friends, relatives and co-workers what they know about this type of loan or read reviews. Choosing a legitimate and reliable lending institution can be a difficult task though, since a lot of scams have evolved in the market. This is the main reason why extensive research should be done before making a final choice.
2. After you have chosen a local lending institution, you can now fill out and submit the application form. Be sure to have the necessary documents such as your credit report, proof of your identity, etc. Requirements may vary depending on your chosen lender.
3. You might need to present a property appraisal.
4. Once approved, make sure that you have read and understood everything before finally signing any contract or document.
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