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Reverse mortgage is also termed as Home Equity Conversion Mortgage or HECM. It is a specific loan that is offered to the senior citizens in the United States who are aged 62 years or above. Reverse mortgage is a tax-exempt loan. It functions as a helpful tool to switch the home equity of a senior homeowner into cash flow. Essentially, a senior citizen of the United States can get tax-exempt cash payments from the lender (monthly or lump sum) up to the amount of equity that he has in his home. The possession of the property is retained with the senior citizen. The loan does not get due for payment unless he passes away, sells his home or moves to another place.
What is the Difference between a Reverse Mortgage and a Conventional Mortgage?
Under a conventional mortgage, the homebuyer secures a loan and pays it off through monthly mortgage payments. Once every payment is made, the loan diminishes and the home equity of that individual goes up. While the mortgage loan has been completely paid (no installment is due), the house becomes free from debt and the homeowner has complete possession of the house. As per a reverse
mortgage, the homeowner does not have to pay anything on a monthly basis. The amount of interest on the loan is added against the property and functions as a pledge for payment. When the homeowner starts to obtain the monthly payments, the debt on the property goes up every month and the home equity diminishes accordingly.
How is a Reverse Mortgage good for you?
If you are a senior citizen (aged above 62) and have small or no earnings but own a house, then reverse mortgage can be a beneficial choice for you. The FHA or Federal Housing Administration notifies the reverse mortgage lenders the amount that they can offer you depending on your home equity and age. Qualifying for a reverse mortgage loan is simple. You should contact any of the reverse mortgage professionals in your locality who has a fair knowledge about reverse mortgages and obtain some free advices from him.
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