If you have never taken out a mortgage on your home, chances are there are many aspects of mortgages of which you are unfamiliar. Probably the least unfamiliar of the whole bunch is the reverse mortgage. If you want to learn more about what a reverse mortgage, then here is some information of which you are most likely unaware:
What Is Equity?
The main difference of a reverse mortgage is that it allows the homeowner to borrow against the home’s equity in exchange for making the mortgage payments. Equity is the overall value of a home after all its owner’s liens and loans have been deducted. To compare it to taxes, equity is sort of like the net pay of the house, whereas the total value is the gross. By allowing the homeowner to access the unencumbered equity, this makes it possible for the homeowner to receive the loan over a period of time rather than all at once, enabling the homeowner to pay off the loan after he or her has moved from the house.
Who Would Want a Reverse Mortgage?
Typically, reverse mortgages are for people aged 62 or older, especially those living on a fixed retirement income. By borrowing against the home’s equity, the homeowner can avoid having to make monthly payments. Obviously, for senior citizens on a fixed income, this is ideal.