A mortgage loan on a house that you already own or you plan to buy is something that most people have and more so owing to the fact that owning your home in these troubled financial times is quite difficult without a supplementary source of the finance. This is why mortgage and other similar forms of loan have become a rage with the average consumer.
But have you heard of the reverse mortgage loan concept? Well, it is a second mortgage that you can take out on your own house (only after the age of 62) in order to finance the various expenses that you have to incur due to the house. Sounds interesting, doesn’t it? Well, here are a couple of things to consider regarding reverse mortgage before you jump onto it -
1. What Exactly Do You Get?
What exactly is a reverse mortgage? Why would you want to take out a loan on your house after completing the payment of one? A reverse mortgage is usually approved for people above the age of 62 as a line of credit (or a lump sum amount of money in some cases) in order to help you pay off the expenses that you accrue in order to maintain your house.
The best thing about the reverse mortgage on your house is the fact that you will not be requiring to pay it off till you own the house. Yes, it will acquire interest on the amount that was sanctioned, but you will only need to pay it off once you have sold the house.
2. The Conditions
Since you are not paying off your loan in the case of a reverse mortgage, the bank will impose some other restrictions on your lending capabilities in order to minimize the risk of its losses. When you take out a reverse mortgage on your home, the bank will evaluate the home and apply the prevailing interest rate on it in order to decide the final amount that you will pay back. During the period of the ownership of the home you will not be able to take out an additional loan against your house. By this way the bank ensures that even if you fail to pay off the loan after selling the house, its losses are at the bare minimum level.
3. The Payback
The reverse mortgage doesn’t require you to pay for the sanctioned loan right away after you start enjoying the benefits. On the contrary the bank will need you to payback the amount (the borrowed amount after the interest is imposed) once you sell the house. This way you have a steady source of finance for any maintenance purpose on the home without needing to tap into your savings. In case you are running into problems with the payback, don’t hesitate to contact a real estate settlement expert like Ali Farahpour.
In the case that you end up selling your house at a higher value than what you owe to the bank, you can rest assured that you will get to keep the difference amount without any hiccup!
Vijayraj Reddy
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