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Reverse Mortgage

Umesh (Article) (56 Points)

01 December 2008

Dear All

If any one knows about the Reverse Mortgage please tell me

its very urgent

my mail id is

umesh2309jain @ gmail.com

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Mani VGS (Teacher) (729 Points)
Replied 01 December 2008

REVERSE MORTGAGE

Mortgage Meaning:

„Ï A transfer of “interest in property [immovable]” or “its equivalent” to a lender for a debt is called as “Mortgage”

„Ï Property means “Ownership”.

„Ï Interest in property means “Rights in the ownership”

„Ï Such interest in property is transferred for the purpose of giving security to the lender

„Ï Debt will be usually ‘loan of money’

„Ï To be precise, “Mortgage is a security for the loan that the lender makes to the borrower”

Reverse Mortgage Meaning:

ƒº A mortgage in which a homeowner, usually an elderly or retired person, borrows money in the form of annual payments which are charged against the equity of the home

ƒº A type of mortgage where homeowners can borrow money against the value of their home.

Regular Mortgage Vs. Reverse Mortgage:

• Reverse mortgage dose not hold the exact opposite meaning of regular mortgage, though the term implies so.

• An individual can apply for a regular mortgage loan irrespective of his age. For getting a reverse mortgage loan, you have to be a senior citizen

• In case of a regular mortgage loan, you require to make a down payment for getting the loan advance. After receiving the loan amount, you start making monthly payments for repaying the loan. But, in case of reverse mortgage loan, no repayment of the mortgage (principal or interest) is required of the borrower(s) until the borrowers are deceased or the home is sold. However the transaction is structured so that the loan amount [reverse mortgage] will not exceed the value of the home over the life of the loan

• A regular mortgage refers to that mortgage loan which you take in order to buy a home of your own. But, the reverse mortgage is the loan which you take by cashing out the equity locked up in your home

• The purpose of taking a regular mortgage loan is always buying a real estate property. But, in case of reverse mortgage loan, you can use the loan amount for any purpose.

• Your credit report can influence your regular mortgage loan. In fact, the interest rate that you will be paying for the mortgage loan is determined on the basis of your credit score. But, for getting a reverse mortgage loan you so not require an impressive credit report.

• In case of a regular mortgage loan, you always carry the risk of foreclosure if you miss your monthly payments. You can even lose your home if you become unable to repay the loan. But, in case of reverse mortgage loan there is no chance of losing the roof over your head.

• Once, you repay the regular mortgage loan, the mortgaged home is returned back to you and after your death it naturally becomes a possession of your heirs. But, in case of reverse mortgage loan, after your death, your home is not passed on to your heirs. They can own it by repaying the loan amount charged by the reverse mortgage lender.

• In case of regular mortgage loan, you start with zero equity and 100% debt and as you make payments every month, gradually, your debt amount decreases and home equity rises. On the contrary, in case of a reverse mortgage loan, you begin with zero debt and 100% home equity and with the passing time, your debt burden rises with a falling home equity.

Advantages of Reverse Mortgage:

• The borrower's credit is not relevant, and is often unchecked, since the borrower does not need to make any payments. As the home serves as collateral, it must be sold in order to repay the mortgage when borrower dies (in some cases, the heirs have the option of repaying the mortgage without selling the home)

• No need to make payment [principal or interest] till the asset is sold or the borrower dies. However if the legal heirs of the borrower decides to repay the loan amount after the death of the borrower, the house need not be sold on the demise of the borrower.