Reverse Mortgages ? a Reversal of the Mortgage Process

Mortgages have assumed a number of characters from the time of their inception. The traditional mortgages used to be of the repayment type. Every month the mortgagor used to pay a certain amount towards both principal and interest. Sensing the hardships that people have to face in making these payments, mortgage providers came up with interest only mortgages. But the present day customer is more pampered. He needs a mortgage where he enjoys the cash, but is not required to pay a penny towards the repayment.

A reverse mortgage is a perfect solution to such requirements. It allows a homeowner to plough the equity in his home to get cash. While the borrower enjoys cash on the mortgage, he is rid of any monthly payments.

The amount of loan received on the reverse mortgage will depend on the age of the borrower and the value of the home. The borrower has no obligation to repay the loan as long as he continues to reside in the house or as long as he survives.

To understand the reverse mortgage, it will be beneficial to compare it with forward mortgages. The forward mortgages are the traditional mortgages. These require a monthly payment either towards both principal and interest, or only towards the interest. This way the forward mortgage is repaid at the end of the repayment period.

However, reverse mortgage works opposite to the forward mortgage (hence the name). The lender advances money to the customer, for which he receives no payment. This means that the debt goes on increasing. Simultaneously the equity in home decreases. This is a rising debt and falling equity scenario. The amount of debt can never increase the value of the home. Thus, the mortgage provider, at the time of repayment, can only lay claim on the home.

Reverse mortgage is only available to people who are 62 years or more of age. The home to be mortgaged must be owned by the borrower, either individually or as a joint holder. He must have lived in the home for the majority of the years and this must be the primary residence of the customers.

Reverse mortgage is a good source of income for the elderly people. The borrower must decide the manner in which the amount received through the reverse mortgage is to be disbursed. The government does not tax the amount received on the mortgage, and the borrower is free to use the money in the way he likes. Customers who want a regular income can draw a regular monthly payment. Some customers want a credit line opened in their name so that they can draw cash as and when they want. For others the availability of a lump-sum amount is more important, since they can apply it for purposes that are more constructive. Even a combination of these options may be used to draw the money on mortgage.

The reverse mortgages are also distinct from the other mortgages on the ground that there is no limitation on the amount of income a person must have in order to be eligible for a reverse mortgage. The mortgage is secured on the home of the borrower. This shields the lender against any defaults on the mortgage. Therefore, credit history of the borrower is not much of a problem.

Keeping the home as collateral does not mean losing the right to stay in the home. The borrower can continue living in the home as long as they wish. The mortgage provider holds the right to the property, or the first mortgage. When the mortgage is repaid, the mortgage provider has to part with the rights to the home.

The mortgage will have to be repaid on the death of the last of the co-owners, if the borrower moves house permanently, or if the house is sold. Repayment of the mortgage also becomes due when the borrower fails to pay the property taxes, maintain the home, or pay the insurance of the home. Bankruptcy, letting your home, adding a new owner to the homes title, and being indicted in a fraud or misrepresentation are sufficient grounds on which the mortgage provider may demand repayment. If in case the borrower is not able to repay the mortgage, then the house will be confiscated.

Reverse mortgage leaves little equity in the home to be used by the heirs, unless the home equity is growing at an increasing rate. This will even impede the borrower from getting a secured loan or mortgage. Thus, even though a reverse mortgage is better because there is no obligation to make monthly payments, they must be taken with caution. Planning the repayment of the mortgage in advance, will let you enjoy the mortgage, while saving your house from repossession.

Aditya has completed his masters in mass communications from Jamia University. If you need UK Personal Loans, secured Loans,unsecured loans

visit http://www.ukfinanceworld.co.uk

---

Remortgages Guide

Outlined below is a useful remortgages guide. Remortgaging has become... Read More

Applying Online For A Home Loan Can Give You an Instant Approval

"Instant Approval For Home Loans" is a common refrain for... Read More

Mortgage Pre Approval - Getting Pre Approved For a Home Loan Online

A pre-approved mortgage is a must in a competitive housing... Read More

Short-Term Interest Rates on the Rise; Adjustable Rate Mortgage Holders Prepare for Increase in Rate

Interest rates are on the rise and many home owners... Read More

Mortgage Soup

Looking for home mortgage loans can get confusing with the... Read More

The Worst Way to Shop for a Home Mortgage

You've found a house that is perfect for you. It... Read More

Securing a Cheap Home Improvement Loan

Finding a cheap home improvement loan can be a challenge... Read More

Poor Credit Mortgage Reigns High Among Mortgages Available to Bad Credit Borrowers

Like a big brother keeping notes of the erring behaviour... Read More

Refinance Your House

If you have seen all the advertisements regarding refinancing your... Read More

What is a Tracker Mortgage?

A tracker mortgage 'tracks' the Bank of England base rate,... Read More

Securing the Best International Mortgage for Your Home in Spain

Are you one of a growing number of people planning... Read More

Bad Credit Mortgage Loans ? How To Get Approved

Persistence is the key working toward getting approved for a... Read More

Seniors Can Use a Reverse Mortgage to Fund Annuities, Investments, and Insurance Policies

For many seniors in or entering retirement, the prospect of... Read More

Guide to Home Equity Loans

Here is a useful guide to home equity loans. A... Read More

Mortgage Elimination- A Horrible and Sure Way to Lose Your Home to Foreclosure

"Own your home free and clear in 3 to 4... Read More

Is It Time To Buy A House?

At some point as you're writing out your rent check,... Read More

How to Avoid Paying Mortgage Insurance

In today's world, a borrower should not be paying mortgage... Read More

Reverse Mortgages: Information You Need to Know

Reverse Mortgages are exploding in popularity and as the baby... Read More

Consolidate Your Debt With a Home Equity Loan and Improve Your Credit Score

A home equity loan is a loan based on the... Read More

Home Mortgage Loans For People With Bad Credit

Getting a home loan with bad credit has actually never... Read More

Mortgage Cycling May Be Your Best Bet For Equity Buildup and Investment Real Estate

Mortgage cycling is a system that relies on solid budgeting,... Read More

The Mortgage Loan Application Online - Save Time & Money By Applying On The Internet

"You can save time and money by applying for a... Read More

How To Save Money On Your Mortgage

Obtaining a home loan is arguably the most expensive transaction... Read More

The Real Truth About Those: Online Get a Better Loan Web Sites - 6 Things to Look For

You have seen the Commercials on TV go this or... Read More

Stated Income Mortgage Loan - Get Approved Online

A stated income or no doc mortgage loan allows individuals... Read More

Bad Credit? With Poor Credit You Can Still Refinance Or Get A Home Equity Line Of Credit

Have you decided to refinance your home or apply for... Read More

Buying A Home After Bankruptcy - Get A Mortgage Loan After Bankruptcy

If you have a recent bankruptcy on your credit and... Read More

Remortgage Serves To Rewind The Reimbursements Of Mortgage

It takes a mighty big effort to secure a home... Read More

Home Equity Increases $1 Trillion in Five Years ? Is the Market Peaking?

A new survey reveals that in the last five years,... Read More

Poor Credit Home Mortgage Loans - The Role of the FICO Score

If you have bad credit history and are looking to... Read More

Thinking About Re-mortaging? Read These Tips First

More and more of use are signing up for limited... Read More

A Personal Mortgage Experience

I don't know what the mortgage situation is around the... Read More

What the Bank Won?t Tell You About Mortgage Refinancing

So you have a mortgage, and you need to refinance... Read More