Most mortgages are sold at least once during the life of the loan. A mortgage company or your local bank will sell the loan to free up their cash and then lend out more money other home buyers. When the mortgage is sold of it is called an assignment. The party that bought the mortgage is now responsible for dealing with you the customer to make sure that all payments are made for the next 15, 20...

Understanding Reverse Mortgages

Matt Ellsworth

Reverse mortgages are another good concept in the world of mortgages. A reverse mortgage is a mortgage that works in the reverse way i.e. you receive payments rather than make payments. With reverse mortgage, you keep adding to your debt rather than reducing it.

Reverse mortgage is an option that is available to older people generally to people who are over 62 years old. Of course, the assumption is that you have enough home equity in the house that you want to use for reverse mortgage. Moreover, a person can avail of reverse mortgage only if he/she is living in the house that he/she wants to get a reverse mortgage on. So a reverse mortgage gets you regular payments and as you receive these payments you build a debt. But when do you pay the debt that is build through reverse mortgage? Well, the reverse mortgage loan isn’t required to be paid back until you live in that house. So, the reverse mortgage loan is to be paid back when you either stop living at the house (whose home equity you are using to get the reverse mortgage) or you sell the home or you die.

Reverse mortgages really come as a boon to older homeowners. The cash generated by parting with some of their home equity (to get the reverse mortgage) can help these old home owners in generating cash for various purposes e.g. the cash thus generated could be used for financing home improvements, or the cash could act as a supplemental retirement income or it could be used for paying off a current mortgage or it could be used for covering some health expense etc. Also, the income generated from reverse mortgage is generally tax free. Moreover, once you payoff the reverse mortgage loan partly (or fully), the interest portion of the loan may qualify for income tax deductions (this further adds to the list of benefits from reverse mortgage).

You must check the fee and other expenses related to reverse mortgage before you go for one. In fact, you should do a good research by getting reverse mortgage offers from various mortgage lenders before you select the offer that gives you the best returns (as you would for a normal mortgage). Moreover, since the title of the house remains in your name, you would be expected to pay the property taxes, insurance and other expenses that you incur on your house.

All in all, reverse mortgage is surely a good option for older homeowners.

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