What Is A Reverse Mortgage
A loan based on your home’s equity is a Reverse Mortgage. These are sometimes confused with home equity loans but the difference is that they are not credit based. It is basically taking a part of what your home is worth and turning it into cash. Reverse Mortgages can have many uses like, paying off debt, putting down payment on a second home, or payoff an existing mortgage.
How Does A Person Receive A Reverse Mortgage
When someone receives a reverse mortgage, they have five ways of accepting the money. The choices are tenure, term, line of credit, modified tenure and modified term. A Reverse Mortgage that is received as a line of credit, modified tenure or modified term will show up on your credit report. Tenure is received as a payment each month as long as one borrower lives at the home. Term is only received as monthly payments for a selected amount of months. All of these terms require that you or one of the borrowers remain in the residence.
Great Facts To Know About Reverse Mortgages
As with making any financial decision, it is best to know all the facts. Trying to qualify for a reverse mortgage is much easier than trying to qualify for a regular type of loan. If your reverse mortgage is approved by HUD, by law the borrower cannot be forced from their home. Reverse mortgages are not taxable and in the event of the borrowers death the debt will not go to any heirs. It is also good to know that reverse mortgages do not give the borrower access to their whole equity. The mortgage loan is used as a tax deduction only when the borrower repays the loan.
Reverse Mortgages is a very helpful tool to many individuals but gather all the information available before making such a big financial decision.