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Saturday, November 19, 2005

What is Reverse Mortgage?

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Reverse Mortgage is a special type of loan in which the lender makes payment to the borrower on a periodic basis using the borrower's equity in the home as a security. More precisely a reverse mortgage can be defined as a loan on home equity. This kind of mortgage is specially meant for elderly homeowners.


Who offers Reverse Mortgage?
Apart from mortgage agencies, Reverse Mortgage is offered by banks and many financial institutions. If you are in the United States then the most popular reverse mortgage program is the federally-insured reverse mortgage, called the FHA Home Equity Conversion Mortgage Program (HECM) along with Home Keeper reverse mortgage which is being offered by a private mortgage company. These reverse insurances are available in almost all states in US. In Canada the Canadian Home Income Plan reverse mortgage plan is quite popular.

Benefits of a Reverse Mortgage
Reverse Mortgage comes as a boon to elderly homeowners and has many viable benefits. A few benefits can be listed as follows:

  • Reverse Mortgage allows you to keep possession of your home
  • There are no monthly payments
  • Income or credit qualifications are not required
  • The loan amount will not be more than your property value
  • Cash received is tax-free
  • Cash received does not affect your social security or Medicare
  • The funds can be used as required

From all kinds of mortgage services offered, reverse mortgage stands out as a special mortgage plan owing to its benefits to senior citizens and its allied viable benefits. But given these facts there have also been instances of reverse mortgage horror stories caused by heavy losses. This is why one needs to be extremely careful before going for reverse mortgages.

　

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