What Is a Reverse Mortgage?

Mortgage loans are used by millions of Americans to afford their residence without having to put down the full value of a house. The idea of a traditional mortgage is that a bank is willing to loan money to a potential homeowner to allow them to afford a home without having the assists required to do so. Although a mortgage recipient may not have the means to buy the property outright, over time, the goal is to own the property at some point. However, a reverse mortgage is a different entirely.

What Is a Reverse Mortgage?

A reverse mortgage is a loan that allows senior citizens to liquidate their assets in preparation for a move from a home to a new living situation. A reverse mortgage is a scenario where a bank gives money to a senior citizen while they live in a home, and once the citizen moves out of the home, the bank will take the home and sell it as payment of the loan. During the years that the citizen resides in the home, he or she will still have to pay property taxes and for home insurance. However, the resident will not have to pay a mortgage, and in fact, he or she will be given money to pay for expenses like property taxes, medical needs, and other scenarios.

Some of the details of a reverse mortgage:

• ·         The collateral of the loan is the home’s equity.
• ·         Homes on a reverse mortgage need to maintain FHA guidelines.
• ·         The funds of a reverse mortgage may be restricted for the first 12 months after loan closing.
• ·         The owner typically sells the house to repay a reverse mortgage.
• ·         The owner is not liable for any debt the home’s sale does not cover.

As you can see, reverse mortgages can be extremely helpful for senior citizens who want to live in their home but have other expenses that need to be taken care of. If you have any questions regarding reverse mortgages, reach out to American Investment Planners to get the answers you need!