There are many misconceptions about reverse mortgages. Many people think it is a type of loan or another financial instrument, but it’s not. A reverse mortgage loan is distinct from a traditional mortgage loan, and we’ve got a full breakdown of everything you’ll need to know about these processes and how they differ!
Often structured as either a fixed or adjustable rate, there is a choice between paying based on interest rates or principal. With a traditional mortgage, a home buyer will pay a percentage of the house value as a down payment. This will get paid off over time. Once your loan is paid off in full, the home buyer will own the building.
Reverse Mortgage Loans
The biggest difference between a traditional mortgage and a reverse mortgage is that the homeowner already owns the house in reverse mortgage cases. Reverse mortgage loans are a method for senior citizens to finance their retirement years by borrowing against the equity in their homes. A reverse mortgage is not just a loan; it’s a line of credit that gives you access to cash. Instead of making monthly payments to a lender, the lender makes payments to you as the borrower.
What a Reverse Mortgage Can Be Used For
A reverse mortgage can be used by senior citizens (or those who are disabled) to convert the equity in their home into one of the following or a combination of the three:
- A lump sum payment
- Monthly income
- Line of credit
A reverse mortgage loan is the home equity that an individual uses to supplement their retirement income or use as emergency funds for healthcare expenses and living costs.
How Does a Reverse Mortgage Work
How does it work? It’s pretty simple: The borrower can make monthly payments or receive lump-sum payouts, but regardless of how they choose to receive funds from the loan, all interest will be accrued until paid off. As long as you live in the home, you are not required to make any monthly payments towards the loan balance, but you must remain current on your property taxes, homeowners association dues, and insurance.
Get a Free No-Obligation Reverse Mortgage Consultation
At Go Reverse Mortgage, we pride ourselves on excellent customer service and building long-lasting relationships with our clients. Our team wants to ensure you have a gratifying and seamless experience. No matter your needs, we vow to find the best rates for your reverse mortgage! Get in touch with us today.