Reverse Mortgages
vs.
Traditional Mortgages
There
is much talk these days about reverse mortgages. They can be a great
way for senior citizens to take control of their finances or get items
they need without taking on another monthly payment. But how do they
differ from traditional mortgages?
First, let’s take a look at a traditional mortgage.
Regular
mortgages are obtained to buy a home. First the home must be inspected
for certain problems and appraised to ensure that it is worth the
amount of money the lender will be loaning you. You must also provide
proof of income and go through a credit check so the lender knows that
you have the means to pay it back and a reasonably good track record of
paying your debts in a timely manner.
You
must also decide whether you want to get a fixed rate or adjustable
rate mortgage. The best one for you will depend on your particular
situation. Once you have been approved for everything and decided which
type of mortgage you want, you can close the deal.
After
all of the paperwork is done, you are ready to begin making your
monthly payments. In the beginning the lion’s share of each payment
will go toward interest. As you continue to make payments, more and
more of the money will go toward the principal. This results in greater
equity in your home. Once you have paid the mortgage in full, you have
100% equity.
Now, let’s look at a reverse mortgage.
Reverse
mortgages are only available to persons who are 62 years of age or
older. They allow you to borrow against the equity in your home. But
unlike a regular home equity loan, you do not have to pay the money
back in monthly payments. As a matter of fact, it doesn’t have to be
paid back until you move out, sell the home, or pass away.
Getting
a reverse mortgage is fairly easy. As long as you are over 62, own your
home, and have either paid your original mortgage in full or can pay it
off with the proceeds from the reverse mortgage, you probably qualify.
Since there are no monthly payments, there are no income requirements
to get a reverse mortgage.
In
general, the home must be sold to pay back the loan. If the owner dies
while still living in the home, the house is usually sold to pay off
the mortgage. Any funds beyond those owed will go to the homeowner's
estate.
The
opposite of what happens in the traditional mortgage process occurs
with a reverse mortgage. Instead of gaining equity in your home as you
lower your debt, you are losing equity in your home as you increase
your debt.
As
you can see, the reverse mortgage is aptly named. It allows seniors to
tap into the equity they have in their homes and use it for anything
they need. In exchange, the lender gets a portion of the homeowner's
equity.
If
you would like more information about the reverse mortgage process and
how it can help you live out your retirement without the stress of
financial burdens please call me or one of my team members at
877-787-1003 or send an email here: info@thebarathgroup.com
We will be
happy to provide a complete complimentary analysis of the amount of
money you could expect to receive from the best available products.
Sincerely,
James Barath, CMA, CMPS
Phone: 877-787-1003
Fax: 888-797-9062
