For homeowners who need money or they want to help their children or grandchildren with some funds, there is an option financial one. A reverse mortgage allows you to convert a portion of home equity into cash. It is a loan that is available as a lump sum or a series of payments. The basis for the loan is the equity accumulated by the elderly at home. What is the difference between a reverse mortgage and an equity loan? The first can not be used unless the borrowers are 62 years of age. While a home equity loan does not have an age requirement, provides checks or a credit card that can be used in an amount to be agreed. The total is available when the deal is closed. With a reverse mortgage you have the option of monthly payments or in a lump sum. The payment for the difference. A home equity loan requires monthly payments over the life of the loan until it is fully paid. A reverse mortgage does not require installment payments. The balance is paid at the end of the mortgage. Although the reverse mortgage has some advantages, one must also understand the disadvantages.
Although you may think of a reverse mortgage as your own money, not free. The bank, which has to wait until you move out of your home or refinances, wants to be paid for the transaction. You will pay interest on the loan costs and closing like a normal mortgage.
While withdraw money against the value of your home, the equity will be reduced. If you plan to use that money for retirement, a reverse mortgage will reduce the funds available. The interest you pay will also reduce the amount of money available for you. Also, when you die, your heirs will receive less money if you got a loan against the value of your home.
With a reverse mortgage, you will not be able to get a loan for the full amount of equity in your home. If the value of your house declines substantially, the reverse mortgage lender will want protection for their money back. A reverse mortgage is probably not the answer to all your financial needs, especially if you have a substantial amount of money accumulated before leaving to work.
If you receive SSI, Medicaid or other benefits, advances that you receive from a reverse mortgage could be considered active, and you could lose your eligibility for public assistance.
If after reviewing the disadvantages of a reverse mortgage is a transaction feel financial for you, first you must get advice from a local counseling service approved by HUD. The purpose of the counseling service is to make sure you fully understand how a reverse mortgage. After counseling, complete an application form and choose an institution financial to work. As in the case of a traditional mortgage, no closing costs and interests.