Reverse mortgages are unique financial plans that are extended to homeowners who are at least 62 years of age and have legal ownership of a home or an estate. This type of mortgages was introduced in order to make it easy for seniors to enjoy their retirement lives by being financially independent. Lenders who offer this type of loan use the home’s equity value as security to cover the amount of money that is given out in the loans. There are different factors that set this loan apart from other loans. This is specifically due to the reason that in most cases, this is a special type of loan that is handled differently from other loans. As such, it is always important to ensure that before taking this loan, you should fully understand the terms, conditions and policies of reverse mortgages.
Unique factors that sets this mortgage type from others
The best and most unique thing about a reverse mortgage is the fact that this type of loan does not require borrowers to make any regular monthly repayments. This is due to the sole reason that the loan only matures upon the death of the borrower. As such, no repayment can be made for this loan unless the borrower dies or any term and condition in the lending contract is breached. The terms and conditions issued in the lending contract differ from one lender to the other. As such, it is highly important to ensure that you are perfectly aware of the terms and conditions that are set by different lenders. In addition to this, you should ensure that you are comfortable with each of the terms and that you can effectively meet them. Reverse mortgages are also quite unique in that they have a minimum age limit, below which you can not borrow money from a reverse mortgage loan.
Calculating reverse mortgage
It is quite easy for you to calculate a reverse mortgage especially when you are aware of how these loans operate. The first thing you need to consider while calculating this loan is your age and that of your spouse ( if it’s a joint reverse mortgage).In most cases, applicants whose ages are higher qualify for high loan amounts. There are different provisions that have been put in place in order to make quite easy for borrowers to know the highest amount of loan they can qualify for based on their ages. After identifying the highest amount of money that you qualify for, you should then settle on the best payment method through which you want to receive the money.
Payment options in reverse mortgages
There are different payment options that are available to borrowers in order for them to receive money from a reverse mortgage. The first method is the lump sum payment whereby you receive the total amount in the loan as a single payment. This is usually the best option especially in instances where you are required to settle an outstanding mortgage balance. You can also opt for monthly payment, especially in instances whereby you are not required to pay any balance. The third option is the line of credit which is the most preferred method mainly due to its economic nature.