What Is a Reverse Mortgage Loan?
A reverse mortgage is a special type of loan available only to older homeowners with full or nearly full equity in their homes. Such owners can borrow against the equity they have built up over the years, but no repayment is necessary until the borrower sells the property or moves elsewhere. If the borrower dies before the property is sold, the estate repays the loan (plus any interest that has accrued. These loans have become increasingly popular. If you believe you qualify for such a loan, be sure to have the document reviewed by an attorney or financial advisor.
This is a relatively new type of “mortgage” secured Housing Loan, which uses the equity or spare asset value remaining in your property. You can borrow up to 60% (in some cases) of your equity but there are limitations relating to your age. In most cases the lender will “capitalize” the interest component with the balance of the loan owing, and together with accrued or compounded interest repay the debt from your Estate. This type of loan product has been available in the USA for the past 10-15 years but only a recent innovation into the Australian market. However, if you are contemplating this type of loan it would be wise to seek independent advice as you are limited to the amount you can borrow.
Reverse Mortgage Loan (RML) is a Scheme developed by the National Housing Bank (NHB) to help Senior Citizens (persons above the age of 60 years) to avail of periodical payments from a lender against the mortgage of his/her house while remaining the owner and occupant of the house. The borrowers are not required to service the loan during their lifetime and, therefore, do not make monthly repayments of principal and interest to the lender. RMLs are extended by Primary Lending Institutions (PLIs), such as Scheduled Banks and Housing Finance Companies (HFCs).
Reverse mortgages let homeowners tap in to the value of their homes and receive money from their lenders. The money can be withdrawn in a single lump sum, received in monthly payments, or take the form of a line of credit, depending on the arrangements made in the reverse mortgage agreement. You must meet several conditions before you can qualify for a reverse mortgage. You must be 62 or older and own your own home, condominium, or townhouse, and live in it as your primary residence. Co-op owners typically will not qualify for a reverse mortgage. Most lenders also require that there be no other debt against the home. If you still owe some debt on your home, you can arrange to pay it off with some of their reverse mortgage payments. The amount of the reverse mortgage is based on the value of the home, so your credit history is not a significant factor. The age of the borrower, interest rate, and loan fees will also factor into the amount of the reverse mortgage. As long as you are livin
A Reverse Mortgage loan is a lifetime mortgage available to residential property owners over the age of sixty living in their own home. It is a loan secured against your home, or with some lenders, your investment property. At any stage, you may also simply pay out the loan to release the mortgage. It simply enables you to use the value of your home and convert the equity to allow you to live your life as you choose. In short, it means we release some of that money tied up in your house so you can have an amount of ready cash, or increase your monthly income – or both – to enjoy your life. The Reverse Mortgage loan solution is relatively new concept in Australia, however it has been gaining popularity in the both the UK and the USA where a total of over 150,000 people have taken advantage of this option.
