Reverse Mortgage

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Definition

A reverse mortgage is a mortgage loan that allows an individual, who is a homeowner, to receive or borrow money using his/her home as security for the loan thereby without having to sell the home. The maximum amount that the individual will be able to borrow will depend on his/her age, the home’s appraised value and the lender. A reverse mortgage does not require monthly mortgage payments. An individual doesn’t need to make any payments on this type of mortgage until the loan is due. This is usually when the individual moves out of his/her home, sells it or the individual dies. The individual will owe more interest on a reverse mortgage the longer he/she goes without making payments, resulting in less equity in the home.

Eligibility criteria for a reverse mortgage are:
• An individual must be a homeowner
• An individual must be at least 55 years old
• Home used to secure a reverse mortgage must be the primary residence of the borrower
• If there’s a mortgage on that house already, the individual must pay it off when he/she gets a reverse mortgage (can use the money received from the reverse mortgage)

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LAYMEN TERMS

A person is above the age of 55 years of age, wants to bus a car but doesn't have enough money. He has a house and he has paid off all his loans on the house. He can now take a reverse mortgage loan by keeping his house as a security to get the money in order to buy a car.

HOW DOES THIS TERM APPLY TO YOU

Suppose you have paid off your loan on your home, now you want to go to on a dream vacation on your bucket list or do home renovations. You can borrow cash using your property as equity by taking a reverse mortgage.

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