How Do Reverse Mortgages Work

How Do Reverse Mortgages Work In Favor Of Seniors 
  by Juhani Tontti,  guest author


It is important for a senior to understand how do reverse mortgages work, before he or she can honestly determine, whether these products are useful and will solve the need for added monthly income. Nowadays many seniors can ask from their friends, because the senior reverse mortgage has been on the market since 1989.
When a senior asks how reverse mortgages work, a simple answer without details is, that it gives cash money every month, which comes from the equity of his or her home. So this loan type works in a reverse way compared to the traditional mortgage and there is no monthly payments.

1. Easy To Qualify.
The reverse mortgages work in the way, that almost everybody can qualify. Yes, the qualification rules are clear and easy to fulfil. A borrower must be at least 62 years old, own a home, where he has equity left and which he uses as a permanent home.
That is all! The reverse mortgages work in the way, that the loan is always taken against the equity of the home. That means, that the income nor credit information are not asked. And almost all house types are accepted, with some exceptions concerning the mobile homes.

2. Up To 3 Persons Can Make The Deal.
One person, a couple or 3 different persons can be borrowers. The reverse mortgages work in a flexible way and the borrowers must not be relatives to each other. The only requirement is, that they all are owners, are at least 62 and at least one of them uses the house as a permanent home.

3. The Ownership Will Stay.
When a senior or seniors take the reverse loan from the bank, the ownership of the home will remain unchanged. That means, that a lender can never take the ownership, not even in that case that a senior cannot pay all costs nor the capital, when the loan will be closed. There is one exception. The borrower must take care of all taxes, insurances and to keep the home in a good shape.

4. The Counselor Will Guide.
Every senior, who will apply for a reverse loan, must meet the federal counselor. Actually this compulsory meeting is very useful, because the counselor is not in the service of the lender but an independent expert. Only he can taylor make the loan for the senior needs and even to recommend lenders with good reputations.

5. What Is The Difference To The Traditional Mortgage?
The main difference is, that a senior does not pay back anything, when he has a reverse loan. There is no monthly payments. So, if a senior has a traditional mortgage left, he can first pay away that with the reverse loan.
This means that also the traditional monthly payments will be left away. So all costs and the loan capital will be paid away at once, when the loan will be closed. This happens, when the last owner will move away or die and the house will be sold.
The money comes from the selling price of the house. If the selling price does not cover the costs and the loan capital, the compulsory mortgage insurance will pay the missing part.

About the Author
Juhani Tontti, B.Sc., Marketing. The reverse mortgages workin that way, that you have to meet a counselor, who can explain how do reverse mortgages work in your particular case. Visit: reverse mortgages pros and cons at http://www.reversemortgageearnings.com/