Reverse Mortgages have been changing the face of the American Homeowners. Instead of living in a home, the homeowners would live in a home that is owned by a third party. The reverse mortgage would offer them equity in their home to pay for the monthly payments. Before we talk about what is a reverse mortgage, let us take a look at what it means to own your own home.
It means that the homeowner can stay in the house for a long time, without paying any mortgage or rent. It would be better to pay the interest on the debt than the principal. This is called HECM reverse mortgage loans. People should note that the interest on the reverse mortgage would come out of the principal amount.
There are many advantages with the use of this type of loan. The first is that they help the homeowners avoid paying the high interest rates in the market. The homeowner would not be burdened with paying the higher rates that the market rates, in addition to the mortgage itself would be reduced significantly. The homeowner would get the benefits of a reverse mortgage from the other party.
The second advantage is that the loan has a very low interest rate. A reverse mortgage has less than 1% interest. A large percentage would be the interest that comes out of the homeowner’s principal. As a homeowner, you would be in control over how much you borrow from the lender. But there are some negatives with this type of loan as well.
A lot of the time you would be paying the high costs that are paid in the loan. These costs would be based on the investment value of the house. You would need to think of ways to save the money from the interest payments. Some would include refinancing or down payment.
Lastly, you would have to give the lender access to the credit history of the homeowner. If the home is in good condition, the homeowner would have to prove to the lender that it is not a risk. They would try to keep the assets in the house while paying the loan.
Reverse Mortgage Pros and Cons are definitely positives. It would be a great way to live in the house for a long time, without paying any mortgage or rent. To learn more about the advantages and disadvantages of the reverse mortgage, check out the links below.