Many people look at the process of a mortgage and wonder how exactly do you put your mortgage in reverse?
In order to understand a reverse mortgage, let's first investigate at a normal mortgage for a first time home buyer. When you first start the mortgage process, you shop many mortgage lenders or perhaps employ the services of a mortgage broker or loan officer who review your credit and financial information. They often look at your credit history, long term and short term debt, income and expenses in order to determine how much money you can borrow, at what interest rate, and for how long. They use all this information to make sure that you are capable of paying back the money, plus interest.
Based on the terms that you and your mortgage lender or broker have agreed upon, you pay a monthly, bi-monthly, or sometimes balloon payment as the principal and interest payment become due. The mortgage broker should work with you to determine a feasible way to pay the mortgage, meaning it should not put you into financial hardship.
You pay the mortgage payments until the life of the loan is done, and you have paid all the money back that you have borrowed, as well as interest in return for borrowing the money. Every payment that you have made up to the end of the life of the loan has decreased your principal; the dollar amount borrowed, and increased your equity in the property. The equity is what the property is worth.
Over the years, it is most likely that your property has appreciated, as purchasing property is a great investment. In which case, your property that you purchased at $200,000 may be worth $300,000 now, or more.
Now this is where reverse mortgages come in. Older home owners, who usually own their property out right, or perhaps have a small amount owed to a mortgage lender, have the ability to do a reverse mortgage. Some older home owners become short on cash, as they are often retired and do not have a lot of money coming in. What a reverse mortgage does is it allows home owners to use the equity in the home as cash. The mortgage lender actually pays the home owner every month, from the equity built in the home.
The home owner no longer makes payments, but enjoys the money that his or her home has provided. As opposed to the regular mortgage in which the equity increases, a reverse mortgage actually decreases the property's equity. The amount that can be borrowed is directly related to the homeowner's age, value of the home, interest rate, and life span of the owner.
The money removed from the equity is usually recovered when the home is sold at the time of the owner's death.
Getting a reverse mortgage can be a great option for older home owners so they can enjoy themselves, with out having to worry about financial hardship. It is also a great benefit of a home owner to be able to use the equity built in the house, as in the act of refinancing.
If you are an older home owner, who could use some extra money, speak with a loan officer who can assist you in making this transaction occur. A reverse mortgage may solve many financial problems, including those that may be related to health and wellness care.
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage/
