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Sarah Said:

Tell me all about reverse mortgage and whoever offers it?

We Answered:

reverse mortgage or reverse equity mortgage is a home loan that does not require to be paid back as long as a consumer occupies the property. It provides a way of converting the home equity into cash, and does not require monthly payments as in other mortgages. Reverse mortgages are meant for senior consumers aged 62 or above.

A reverse mortgage allows a borrower to receive cash in a number of ways.
The cash is provided in one single payment.


The loan is offered as regular monthly cash advances.


The reverse mortgage is also paid as a credit-line account which gives the borrower an opportunity to withdraw a required amount of cash whenever required.


The mortgage loan is also available as a combination of monthly cash advances as well as "credit-line account".

Features of reverse mortgages:
A borrower does not require an income to qualify for reverse mortgage; neither is his credit history verified before approving the loan. The loan amount depends on his age as well as the property value, interest rates and closing costs of home loans in the neighborhood of the borrower.


There is no such repayment scheme required in such mortgages. There is no need of any repayment as long as the borrower or any co-owner occupies the property.


With a reverse mortgage, a borrower remains the owner of the property and is responsible for paying property taxes and homeowner insurance, and also for conducting home repairs.


Before availing a reverse mortgage, a borrower has to first pay off his previous debts or he may also repay them with the cash obtained from the reverse mortgage. But there are lenders including the state or local government agencies who may allow him to repay the previous mortgage after he pays off the reverse mortgage when required.


The amount received as reverse mortgage loan is not taken as income and hence the Internal Revenue Service does not charge any taxes on it.

A reverse mortgage is just the opposite of a forward mortgage which requires the payment of the principal loan amount along with interest on a monthly basis. This helps a borrower in retaining his home equity and hence increasing the home value. But with reverse mortgages, there are no such monthly payments and so the debts go on increasing. The home equity therefore reduces to an extremely low value unless the property value keeps increasing. Therefore reverse mortgages are often known as "rising debt and falling equity".