In the troubled times currently facing the American economy, many people are looking for ways to cut expenses and increase their income. One method being used by senior citizens is the reverse mortgage. This unique type of home loan allows people to use one of their biggest assets to create a stream of income.
The reverse mortgage works just like it sounds. Instead of the home owner making a monthly payment to the bank, the bank makes a payment to the home owner. The amount of the payments is based on the available equity in the home.
People who are at least 62 years old can be considered for this type of mortgage loan. The loan does not have to be paid back until the home is sold or the home owner passes away. Best of all, there are no restrictions on how the money can be used.
Due to the rules regarding a reverse loan it is not possible to owe more than the home’s value. This can be a real comfort to people as they make financial plans for the future. The amount of money that is offered in a reverse mortgage is based on several factors similar to a typical mortgage. The current value of the home, any existing mortgage, interest rate and the limits for reverse mortgage in the local area are all taken into consideration.
In the next installment we will explain how the payments work and how this is an advantage for senior aged homeowners.