Reverse mortgages are one of the largest growth areas in the mortgage
business. These mortgages offer older people the chance to get cash based on the equity they have in their homes or condos. When the reverse type of mortgages are used, the lender pays the home owner an agreed upon rate. The homeowner does not need to pay the reverse payment back, but can use the money in any way they desire. There are many reasons that these mortgages can be a godsend in Holtsville NY.
A reverse mortgage pulls out the cash held in equity in a home, giving the homeowner the funds they need. These funds are not paid back, but, at the end of the loan period, which is usually upon death of the homeowner or upon sale of the home, the reverse mortgages become due.
But, why would any one want a reverse mortgage? Why are more and more Americans looking to reverse mortgages? In many cases, these mortgages are great ways to get the cash that they need. They can be used to pay off medical bills. Reverse mortgages can be used to prepare for long term care. Many people secure reverse mortgages simple to enjoy life. They purchase an apartment in a foreign country. They take vacations and see the world. Perhaps they want to buy a vacation home.
When first created, the reverse loans were slow to gain acceptance.
Homeowners were reluctant to step into these types of loans. Reverse mortgages, once they gained ground and more people understood them, have become fast growing loans. In 1989, the federal government began backing the reverse mortgage. The National Council on Aging is promoting the reverse mortgage as a terrific way to finance home modifications, medical care, and in-home care to avoid nursing homes. These loans can help homeowners prepare for their golden years, whether that be for living the high life or paying for home remodeling in Holtsville NY.
There are a few downfalls to reverse mortgages. Reverse mortgages can be taken out on many homes and condos. Oftentimes, this can leave homeowners vulnerable. Beware – there are disreputable people trying to cash in on reverse mortgages and can be found going door to door to sell them. Also, closing costs can top $10,000. It is recommended that anyone considering a reverse mortgage do so only after very careful consideration of their financial needs and the needs of those who stand to inherit the
Reverse mortgages are predicted to increase even more in the next several years, especially as retirement income and pensions are constantly threatened.
Home equity, simply put, is the difference between the mortgage owed on a home and the property’s market value. Equity increases as the mortgage is paid off, and/or as the property itself gains value through appreciation. A homeowner can use the equity in his or her home as collateral for loans or lines of credit. Many people find such loans useful in the case of financial need or emergency.
Recently, a new way to take advantage of value stored in home equity has become increasingly popular – the reverse mortgage. As the name implies, a reverse mortgage is very similar to a traditional mortgage, except that the cash flow is reversed, i.e., the lender pays you, instead of the other way around.
A reverse mortgage carries several advantages. First, unlike a typical home equity loan, you are not required to make monthly mortgage payments. In fact, repayment for the reverse mortgage loan is not due until you no longer use the property as your principal residence. Second, a reverse mortgage loan will not lead to foreclosure on your home due to missed payments – no small benefit, as any homeowner knows. Thirdly, unlike a traditional home equity loan, you do not have to meet any income-to-debt ratios in order to qualify for a reverse mortgage in Holtsville NY.
Of course, there are certain restrictions on reverse mortgage loans. To begin with, this type of loan is designed for use by the elderly, and is restricted to senior citizens age 62 and older. In most cases, you must have total ownership of your house or owe very little on your mortgage. This is usually not a problem for a conscientious homeowner. Finally, your house or residence itself must qualify for a reverse mortgage loan. Eligible types of residence include: single-family homes, townhouses, detached homes, certain condominiums, and even 2-4 unit properties that you both own and occupy.
Several factors influence how much money you are eligible to borrow with a reverse mortgage. The most obvious factor is the current market value of your home – the greater it is, the more borrowing power you have. The current interest rate also has an impact. In general, an interest rate which is lower will increase the amount of money you can borrow. A final factor is age. Because reverse mortgages are intended for senior citizens, the older you are, typically, the more money you can borrow with a reverse mortgage.