Question:

How does a reverse mortgage work?

Answer:

A reverse mortgage is a product developed to meet the needs of senior citizens. Through a reverse mortgage eligible seniors will have the chance to get a tax-free monthly income, or a large one-time payment, or pay off existing mortgage, or ensure additional health care, etc. against their property. The repayment is due in case of borrower's decease, if the house is sold, or the homeowner permanently leaves the house.

A reverse mortgage works as follows - seniors of 62 or older who own their home (or only have a small mortgage pending on the property) retain full ownership of their property for the time they live there while receiving payments from the lender. There are no income requirements for the clients and both the borrower and the lender are FHA insured. The homeowner is insured in case the lender defaults on payments, and the lender is insured against loss in case the money loaned exceeds property value at a certain point.

A nice thing with a reverse mortgage is that there won't be a foreclosure on the property if for any reason something goes wrong.

Recommended helpful present and future homeowners links:
Why: Refinance to a fixed rate loan while mortgage rates are still low.
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Why: Because FHA loans are insured by the US Federal Government they have very competitive interest rates and are easier to qualify.
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Common misspellings: mortage and morgage