When a person retires, their bills and other monetary needs don’t retire with them. With today’s economic situations, some people reach old age without savings or investments, which they can use for their latter days.
Fortunately, most of these adults have an asset that they can use to get a lump sum of money for emergencies or other essential needs– their house. They can use it to get a reverse mortgage which is becoming more and more popular these days.
But what is a reverse home mortgage?
A reverse home mortgage is a type of loan in which a bank takes your home as collateral and gives you money. However, unlike other loans, the borrower doesn’t have to make loan payments. The bank will add the money lent to the borrower to the mortgage loan balance.
The bank will calculate the amount of money the bank to be lent based on the property’s value. It can also be released in multiple ways, whether a lump sum, fixed monthly releases, or even a credit line.
Reverse home mortgage is only available for people 62 or older. This scheme is developed based on the idea that most adult homeowners have homes that have increased their value through time. Assets like these can be highly beneficial to banks and other mortgage companies.
The good thing about reverse home mortgages is that borrowers get to keep the title of their house. The borrowers would not also be liable if the borrowed money exceeds the property’s value should its market value fluctuate through time.
Furthermore, should the borrowers live longer than expected by the bank, they can make the most out of their property! The bank or the mortgage company can’t forcefully claim the house anytime as the contract of reverse home mortgage doesn’t have a target date.