Reverse Mortgages

Reverse mortgages can be beneficial for a borrower based on their current financial goals and homeowner situation. A reverse mortgage loans allow a borrower to borrow money based on the value of their current home. Unlike a typical loan, lenders of reverse mortgage loans do not expect any type of payment towards repaying the loan. Borrowers can use the money that they get from reverse mortgage loans to pay for other items such as medication, household bills and general living expenses.

Reverse Mortgages: Benefits

The benefit of reverse mortgages is that the loans do not need to be paid back. Upon sale of the home, either when the home is no longer desired or death of the owner, the amount of money owed in reverse mortgages loans is taken away from any profits. In a situation where the home is sold because of death of the owner/borrower, the remaining profit from the home is given to heirs.

Unlike a conventional loan, there are no specific income requirements with reverse mortgage loans to qualify for a reverse mortgages. This is especially beneficial for the elderly who may be have a low-income from retirement or Social Security income. There is also no requirement for the debt-to-income ratio with reverse mortgage loans. With a conventional loan, there is normally an amount that the debt-to-income ratio mush be within, such as 30%. With reverse mortgages, there is no debt-to-income ratio since there will be no payment required to the borrower.

Reverse Mortgages: Requirements

Reverse mortgage loans have requirements that a borrower must meet in order to qualify for a loan. Since this type of loan is substantially different than a conventional loan the requirements differ as well. Requirements vary based on the lender as well. Typically, the borrower must meet age, current loan amount and equity amount requirements. Reverse mortgage loans have been created with the elderly in mind. The age requirement is typically 62, but can vary based on the lender. When a loan application is reviewed, it is important that the current loan can be completely paid off at the time of the sale of the home. If there is a low current loan amount, the application may be approved. Likewise, if the equity amount in the home is high, the application may be approved. If either the current loan amount is high or equity amount is low, the loan application may be denied because the lender may not be able to recover the outstanding loan balance at the time of the home sale.

Payments to Borrower

Based on the agreement between borrower and the lender, payments can be made to a borrower as a one-time payment, line of credit, equal payments or varied amount payments. The specific type of payment options to the borrower will be detailed in the application as well as the final loan documentation.