Comparing Reverse and Forward Mortgages
Many individuals who retire acquire most of their income from social security, pensions, and retirement accounts they have built over the years. However, these income streams may not be enough. Many of these retired individuals find themselves struggling no matter how well they budget their money.
When this happens, a reverse mortgage line of credit is usually a viable option. What a reverse mortgage allows is the homeowner is able to take their homes equity and convert it into money. Basically, the equity that has been built up throughout the years in the form of mortgage payments is paid back as income to the homeowner.
This is unlike a traditional second mortgage or home equity loan for the fact that there is no required repayment until the borrower no longer uses that home as their primary residence. Also, the older the borrower, the higher the loan can be because of the amount of equity that has accumulated over time.
To acquire a reverse mortgage line of credit, an individual doesnt have to have great credit, nor is a steady income required. The main factor at play here is that the borrower be the owner of the home.
And then there is the opposite of the reverse mortgage, which is the forward mortgage. This mortgage is what people acquire when they are purchasing the home. This is when good credit and a steady income are required. If they payments are made late or not at all, the bank can foreclose upon the home because it is the home that actually secures the mortgage.
As payments are made on a forward mortgage, the equity within the home builds. This is because the difference between the amount of the mortgage and what has been paid is the equity. Once the final payment is made on the mortgage, the home is finally owned.
However, the reverse mortgage is the complete opposite of the forward mortgage. This is because the debt increases as the equity decreases. The borrower is not making monthly payments, but the equity is eaten up because there is interest added to it as the money is paid out to the borrower.
Then there is a time when the reverse mortgage must be paid back and the amount could be large, which is determined by the length of the loan. Other factors include if the home had decreased at any time and there was no equity left to borrow or if the value increased and the amount to be borrowed increased. This could have an impact on the amount of debt because of the amount of money borrowed or not borrowed during these periods.
When it is time for the loan repayment to come due, it is usually because the homeowner is selling the home and will not be using it as their primary residence anymore. They usually move to assisted living facilities or an apartment that makes moving around easier. The money that is used to sell the home is usually used to pay back the equity that they have borrowed.
So for those wondering what separates a reverse mortgage from a forward mortgage, this should explain that. This should also help to make the decision of whether or not to add to monthly income by using a reverse mortgage line of credit.
When this happens, a reverse mortgage line of credit is usually a viable option. What a reverse mortgage allows is the homeowner is able to take their homes equity and convert it into money. Basically, the equity that has been built up throughout the years in the form of mortgage payments is paid back as income to the homeowner.
This is unlike a traditional second mortgage or home equity loan for the fact that there is no required repayment until the borrower no longer uses that home as their primary residence. Also, the older the borrower, the higher the loan can be because of the amount of equity that has accumulated over time.
To acquire a reverse mortgage line of credit, an individual doesnt have to have great credit, nor is a steady income required. The main factor at play here is that the borrower be the owner of the home.
And then there is the opposite of the reverse mortgage, which is the forward mortgage. This mortgage is what people acquire when they are purchasing the home. This is when good credit and a steady income are required. If they payments are made late or not at all, the bank can foreclose upon the home because it is the home that actually secures the mortgage.
As payments are made on a forward mortgage, the equity within the home builds. This is because the difference between the amount of the mortgage and what has been paid is the equity. Once the final payment is made on the mortgage, the home is finally owned.
However, the reverse mortgage is the complete opposite of the forward mortgage. This is because the debt increases as the equity decreases. The borrower is not making monthly payments, but the equity is eaten up because there is interest added to it as the money is paid out to the borrower.
Then there is a time when the reverse mortgage must be paid back and the amount could be large, which is determined by the length of the loan. Other factors include if the home had decreased at any time and there was no equity left to borrow or if the value increased and the amount to be borrowed increased. This could have an impact on the amount of debt because of the amount of money borrowed or not borrowed during these periods.
When it is time for the loan repayment to come due, it is usually because the homeowner is selling the home and will not be using it as their primary residence anymore. They usually move to assisted living facilities or an apartment that makes moving around easier. The money that is used to sell the home is usually used to pay back the equity that they have borrowed.
So for those wondering what separates a reverse mortgage from a forward mortgage, this should explain that. This should also help to make the decision of whether or not to add to monthly income by using a reverse mortgage line of credit.
posted by Debt Consolidation Loan at
8:39 AM
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