What You Should Know About Reverse Mortgages

What is a reverse mortgage; this is frequently the question that most senior citizens asked. For those who are still not aware about what is this, this is basically a type of loan that is using the home equity of the borrower to make it as collateral. Rather than borrowing money from banks to buy a home, you are going to borrow the money depending on its current market value. On the other hand, before you make any final decision that you want to apply on this loan, it will be a big help if you will familiarize yourself on its advantages and disadvantages.

Whats a reverse mortgage and what Advantages You Can Get From A Reverse Mortgage?

Given the fact that it is a tough task for senior citizens to secure a low interest rate loan, they may make use of such for their health care, a source of income after their retirement or any other situation. Majority of the lenders are not comfortable in providing loans on elderly individuals as they believe that they are near to their death and may not be able to pay the loan. In addition to that, they do not even have a reliable and stable source of income to pay for the loaned amount. Besides, due to their age, they may soon likely to pass away and the loaned amount will not be repaid. On the other hand, the lenders feel more comfortable as they have secure source of collateral through the borrower's property.

Reverse Mortgage and its Possible Drawbacks

Well, if there are advantages, there of course is the disadvantage. By using this type of loan, the borrowers might just lose their property, which is one of their major concerns. The lender will take ownership of the property if you will not be able to pay for the full amount of the loan. Well, all of a sudden, the advantage of making use of your property as collateral turned to be a huge problem.

Not just that, the loan you get may also exceed to the actual value of your property and this is highly possible. This loan often has a high rate for interest. Because of this, you might notice that you are paying not for the principal amount of your loan but only for its interest.

Some lenders are also requiring their borrowers to maintain the property. For most of us, especially those who are still at young age, this is not really an issue. But for elders, it is most especially, they don't have enough strength, good eyesight or other ability to maintain the house and its surrounding. Continue reading from the http://reverse-mortgage.com page.