ANSWERS: 1
  • A borrower who is 62 or older can purchase a reverse mortgage to pay off any and all debt on their primary residence, including a first and second mortgage debt.

    Significance

    A reverse mortgage pays the borrower as opposed to the borrower paying the bank. It is a way for an older borrower to use the equity built up in their home without incurring a monthly expense.

    Function

    Many homeowners use reverse mortgages to pay off all debts, including a second mortgage, to keep all of their monthly cash flow for other expenses, including medical care.

    Types

    A reverse mortgage comes in three different types: a lump-sum payment, a line of credit, and a monthly installment. Most borrowers choose the lump sum to pay off all debts at one time.

    Considerations

    A reverse mortgage is a good option for a homeowner whose monthly income has greatly decreased and is having trouble paying monthly bills.

    Misconceptions

    A reverse mortgage is just like a traditional mortgage in the fact that when the home is sold, the debt is paid in full. The homeowner, or his heirs, are able to keep the remaining equity in the home. The mortgage company does not get the equity, only the debt owed.

    Source:

    ReverseMortgage.org: About Reverse Mortgages

    NLS.gov: Top 10 Things to Know if You're Interested in a Reverse Mortgage

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