Saturday, February 3

Do you know reverse mortgage?

Never heard of it? So am I!

That is why I thought of sharing this with you.

A reverse mortgage (known as lifetime mortgage in the UK) is a loan available to seniors (62 and over in the US), and is used to release the home equity in the property as one lump sum or multiple payments. The home owner's obligation to repay the loan is deferred until the owner dies, the home is sold, or the owner takes refuge in to the old age care.

Seems to be a novel scheme to me, but unfortunately I am not in U.K.

The difference:

In a typical mortgage the home owner makes a monthly amortized payment to the lender; after each payment the equity increases within their property, and typically after 30 years the mortgage is paid in full and the property is released from the lender.

In a reverse mortgage, the home owner makes no payments and all interest is added to the lien on the property. If the owner receives monthly payments, then the debt on the property increases each month.

If a property has increased in value after a reverse mortgage is taken out, it is possible to acquire a second (or third) reverse mortgage over the increased equity in the home. But in certain countries (i.e. US), a reverse mortgage must be the first and only mortgage on the property.

Courtesy: Wikipedia

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