Reverse Mortgage Home Loans
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*The comparison rates above are for secured home loan products of the lenders as shown, based on a loan amount of $150,000 and a term of 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.
The Reverse Mortgage Loan – Is It For You?
If you are a homeowner searching for a way to fund a much-needed vacation, necessary home repairs, an expensive purchase, or even your retirement, you may want to consider a Reverse Mortgage Loan. Sometimes called a Home Equity Conversion Loan, this type of mortgage allows you to borrow money against the value of your home. No principal or interest is repaid until the borrower moves, sells, or dies. The loan amount will not exceed the home's value over the life of the loan and is calculated by looking at the following variables:
Reverse Mortgage Home Loans
- Original loan amount
- Length of the loan
- Interest rate
- Rate of appreciation
Lenders may not allow there to be other liens against your home. If liens – legal claims against your house -- exist, they may need to be paid off with the money you receive from your reverse mortgage.
Who can take out a Reverse Mortgage Loan? Anyone who owns a home and is at least 62 is eligible for a Reverse Mortgage Loan. You must own your home outright or have a mortgage that is low enough to be paid off at the time of the loan. Although your house can have one to four units, you must live in one of them.
A Reverse Mortgage Loan is perfect for those who are asset rich but income poor. Having a perfect credit score is not required and it is often not even checked because your loan is not paid back out of your income, but rather with the money earned by the selling of your home in later years. The elderly often choose to take out a Reverse Mortgage Loan so that they can live the way they want to live during their Golden Years.
How can these funds be utilized? From providing needed income for those entering retirement to financing that trip to Indonesia – and everything in between, money received from a Reverse Mortgage Loan can be used any way you can imagine. Some borrowers have chosen to upgrade their home by landscaping, remodeling the kitchen and bathroom, adding on rooms, etc. This money, often received in a lump sum, can be used for that highly-coveted flat screen TV, laptop computer, or brand new car. Really, the sky (or at least the sum of your equity) is the limit!
Are there any disadvantages to a Reverse Mortgage Loan? Though there are many clear advantages to taking out this type of loan, you many be wondering if there is a downside. The answer is – Not really, but you do need to be careful and educate yourself, as in all financial matters. Be aware of the following:
- Only take out what you need. By the very definition of this type of loan, your mortgage will increase due to fees and interest rates.
- There are large origination costs. However, these costs can be incorporated into the initial loan balance.
- Though your loan amount is not supposed to exceed the value of your home over the life of the loan, there are some loopholes that allow lenders to nullify this rule. Read the fine print.
- The house must be sold to repay this loan when the homeowner dies. Typically, heirs are given the option to pay off the loan and keep the house.
Property prices in Australia have gone through the roof in the past few years, giving homeowners substantial equity in their homes. After working and making monthly mortgage payments all your life, why not take advantage of your home's equity and reward yourself by living the good life?