Mortgage Options

homes reverse mortgageWhat is a reverse mortgage? Well, the reverse mortgage loan or RML is a special type of mortgage loan which is solely applicable for the senior citizens who have completed 60 years or more. The loan is different from the conventional mortgage loans and enables the senior citizen to avail periodical loan payments from lender against mortgage of her/his home while maintaining his stand as the owner & habitat of the house.

It’s to mention here that the senior citizen taking to reverse mortgage loan won’t need to service the mortgage loan during her or his lifetime and hence is not required to make the monthly repayments for interest and principal to lender. The interesting part of the reverse mortgage loan is that here the loans won’t be due till its borrower expires or sell off the home or vacate his residence. Then, the proceeds that the seniors receive here would be tax free & won’t affect his Medicare or Social Secure benefits.

The reverse mortgage loan sum is based on the property value as is assessed by lender, borrower’s age and the current rate of interest. The frequency of the residential property valuation would be settled by the lender himself which is usually minimum once in every 5 years. The advance could be provided via monthly or quarterly or annual or half-yearly disbursements or in a lump sum amount or as committed credit line or as some unified blend of the 3. The maximum loan period is twenty years.

The senior citizen taking to reverse mortgage loan could use it for a wide range of purposes pertaining to his home such as renovation and upgradation of the residential property and even for the medical exigencies. However, the reverse mortgage loan can’t be used for trading, speculative as well as business purposes.

Reverse Mortgages –the types

The reverse mortgage loans can be of 3 types. First is HECM (Home Equity Conversion Mortgage) which are insured through federal government & make up over 90 percent of all the reverse mortgages. The second one is Proprietary loans that are funded through the private institutions. The third one is single-purpose advances which are funded through non-profit & other organizations. The third type of reverse mortgage loan is meant to be deployed for some specific purpose, dictated according to the provider. However, HECM is the most commonly extended reverse mortgage loan.

Lenders for reverse mortgage loans

The reverse mortgage loans are lent by PLIs (Primary Lending institutions) like Scheduled Banks as well as HFCs (Housing Finance Companies) registered with the NHB.

Eligibility for reverse mortgage loans

The reverse mortgage loans are not lent to anybody and the only people eligible for such loans are the citizens aged 62 years or more. Besides, the senior borrower should own his personal home & have small mortgage balance remaining. It’s to stress here that HECM reverse mortgage loans would be approved for the primary residences only. The eligible residencies are 1-4 unit properties & approved manufactured houses, condos & co-ops.