What Is Reverse Mortgage

The United States Department of Housing and Urban Development, more commonly referred to as HUD, has long been the leader when it comes to the home mortgage. 

Over time, we have watched the world of mortgage grow and evolve.  One option that people need to educate themselves on has to do with the real value of what is reverse mortgage.

One of the things that make a reverse mortgage different from others is that it is a private loan, although it also has the backing from the federal government.  For homeowners who are 62 years and older, who own and live in the home, and have built up equity over the years, there are funds that can be used in any way wanted.

One of the main values when it comes to what is reverse mortgage is that the homeowner’s income is not checked or even considered.  This means the person could have very little or even no income and still qualify for a reverse mortgage loan.  Of course, as with any mortgage, there are various dynamics that are looked at by the lender in making the final decision on approval.

Although many people do not find value of what is in a reverse mortgage when going through the required counseling provided by HUD, this is actually highly beneficial.  During this counseling session, the homeowner has the opportunity to ask questions and get help in making appropriate decisions.  Once this process is complete and the other qualifications have been met, the application process can begin.

As mentioned, the primary value of what is reverse mortgage is that funds are taken out of the equity and then paid out to the homeowner in the way of a monthly payment, one lump sum, as a line of credit, or the homeowner can use any combination.  Best of all, after the funds have been distributed, it is the homeowner’s discretion to spend it in any way seen fit.  As far as paying the loan back, this does not occur until one of three things happens – the homeowner sells the home, moves, or passes away.

Of course, while there are many incredible value factors for what is a reverse mortgage, gaining knowledge about the good and bad is what will ultimately help the homeowner move in the right direction.  As you will see below, consider the good and bad sides to a reverse mortgage prior to making your final decision.

The Up Side

The first value of what is reverse mortgage is about having the freedom to spend the money as wanted.  Some people have worked hard a lifetime and now in the “golden years” want to travel the world to enjoy the fruits of their labor.  However, these funds can also come in handy in the case of paying bills or doing major repairs on the home.

Another area of value pertaining to what is a reverse mortgage is that instead of scrimping every month, barely getting by on money saved up, a pension, or perhaps Social Security or Disability, the money is a great supplemental income.  Considering that any funds taken out of the equity for a reverse mortgage is not taxable, adding another benefit on top of the others.

As long as the homeowner owns and lives in the home, no money on the mortgage loan is paid back.  However, as mentioned if the person moves, sells, or should pass away, then the reverse mortgage would then start to be repaid.  In the case of having heirs, anyone thinking about this type of mortgage needs to have a full understanding of all the options and factors since there are a number of variations.

The Down Side

As you can see from the information provided above, there is tremendous value associated with what is a reverse mortgage.  Unfortunately, there are also some downsides to this type of loan that should be reviewed.  First, there are fees associated with any loan such as application fee, appraisal, insurance, closing, etc.  However, in the case of a reverse mortgage, the fees are typically higher and in fact, there are some lenders that will also tack on a service fee of some kind.

Then, along with the value of a reverse mortgage, consider that for the application to be approved and the funding to become available, the house has to be in good order.  This means the structure itself has to be sound and there should be no serious repairs.  Even with this, there is a good note in that if the homeowner were faced with problems of repair, most lenders of a reverse mortgage would simply add the cost into the principal of the loan.

For many people, the value of what is reverse mortgage far outweighs any potential risks.  While this can be an excellent option, anyone going this route needs to have a clear and full picture of what is expected.  That way, as time goes on, there are no unpleasant surprises.  Remember, the staff at HUD is always available to help in any way possible so take advantage of their service.

 What Is Reverse Mortgage Video