Find Out How Reverse Mortgages Can Help You Retire Happily
A reverse mortgage is a loan given to seniors 62 and older (In the United States) which is used to release home equity as a lump sum or multiple payments. It is basically analogous to an annuity where the interet and principal are paid with homeowner’s equity. The homeowner’s obligation to repay the loan is deferred until the home is solder, the owner leaves, or the owner dies.
This is in strict contrast to a conventional mortgage where the homeowner makes monthly amortized payments to its lender. With each successive payment, the equity increases within their property. By the end of the term, when the mortgage is paid in full, the property is then released from the lender. Compare this to a reverse mortgage where the home owner makes no payments and all of the interest is added to the property’s lien. If that owner receives monthly payments of the available equity percentage for their age, the debt on property increases each month.
There has been a dramatic increase in the number of reverse mortgages being purchased in recent years. The Senate Committee on Aging in December 2007 explored and discussed the aggressive marketing and sales techniques used by mortgage institutions to attract senior homeowners to purchase reverse mortgages. The demand for reverse mortgages is on the rise with more and more seniors turning 62 every year. In December 2007, the Federal government removed restrictions on the number of outstanding reverse mortgage loans that could be underwritten at any time.
With the economy in a downturn please make sure that you visit a trusted financial professional when making these important decisions.Last Modified April 27, 2009 @ 11:27 pm