What Is Reverse Mortgage?
Now all of us who have anything to do with the financial market (even as a customer/purchaser) have heard the term reverse mortgage.
But how many of us really know its meaning and implications? The answer is not many.
Simply put, reverse mortgages are a very convenient mean to access a loan by making use of the primary asset.
Like in other forms of financial lending, reverse mortgages also facilitate flexibility on the pricing front.
The equation of a typical mortgage deal could be defined as 'rising debt, falling equity' and the loan is usually given against your house or any other noticeable property.
A normal mortgage deal, often classified as 'forward mortgage', entails that the person who is seeking to avail loan to buy house must have his claim backed up by a steady source of income.
The mortgage is granted on the basis of the property and in the event of default payments, the property can be snatched by the lending agency.
On the basis of your regular payments, your equity in the property shoots up in a consistent manner and after the final mortgage payment; the property completely belongs to you.
As against this common formula, for availing a reverse mortgage, great credit record or a regular source of income is not required.
The basic premise is that the house belongs to the person who sought a loan.
The quantum of loan is also a function of a certain age criterion.
Older the person, heftier the loan amount could be.
A reverse mortgage differs from a normal mortgage in the sense that unlike forward mortgage, debt increases along with equity.
Monthly payments mechanism is not mandatory and interest is added to the loan amount which eats away at your equity.
If the loan is fixed for a longer time span, you may owe a large amount on the due date for mortgage.
In the event of a drop in the price of the property, your equity stake may diminish.
A reverse mortgage deal entitles you to access funds in three ways - a single lump sum payment, regular monthly advances, or a credit account.
In the event of the death of the borrower, selling out of the property or the borrower moving out of it, there is this strict condition that loan amount should be immediately repaid.
The lenders of reverse mortgage deals ensure a protective cover for themselves through rights like failure in paying property taxes or home insurance premium can be billed as default.
The lender also holds the rights to undertake these payment obligations and for this, the lender will trim your advances to meet these expenses.
For anyone eyeing a reverse mortgage deal, it therefore, becomes imperative to fully understand all the terms and conditions given in the loan documents before going ahead with the deal.
But how many of us really know its meaning and implications? The answer is not many.
Simply put, reverse mortgages are a very convenient mean to access a loan by making use of the primary asset.
Like in other forms of financial lending, reverse mortgages also facilitate flexibility on the pricing front.
The equation of a typical mortgage deal could be defined as 'rising debt, falling equity' and the loan is usually given against your house or any other noticeable property.
A normal mortgage deal, often classified as 'forward mortgage', entails that the person who is seeking to avail loan to buy house must have his claim backed up by a steady source of income.
The mortgage is granted on the basis of the property and in the event of default payments, the property can be snatched by the lending agency.
On the basis of your regular payments, your equity in the property shoots up in a consistent manner and after the final mortgage payment; the property completely belongs to you.
As against this common formula, for availing a reverse mortgage, great credit record or a regular source of income is not required.
The basic premise is that the house belongs to the person who sought a loan.
The quantum of loan is also a function of a certain age criterion.
Older the person, heftier the loan amount could be.
A reverse mortgage differs from a normal mortgage in the sense that unlike forward mortgage, debt increases along with equity.
Monthly payments mechanism is not mandatory and interest is added to the loan amount which eats away at your equity.
If the loan is fixed for a longer time span, you may owe a large amount on the due date for mortgage.
In the event of a drop in the price of the property, your equity stake may diminish.
A reverse mortgage deal entitles you to access funds in three ways - a single lump sum payment, regular monthly advances, or a credit account.
In the event of the death of the borrower, selling out of the property or the borrower moving out of it, there is this strict condition that loan amount should be immediately repaid.
The lenders of reverse mortgage deals ensure a protective cover for themselves through rights like failure in paying property taxes or home insurance premium can be billed as default.
The lender also holds the rights to undertake these payment obligations and for this, the lender will trim your advances to meet these expenses.
For anyone eyeing a reverse mortgage deal, it therefore, becomes imperative to fully understand all the terms and conditions given in the loan documents before going ahead with the deal.
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