Guest Post by Sarah Scrafford
Reverse mortgages are not the exact opposite of regular mortgages, even though the term literally implies that it is. This kind of mortgage is available only to people above 62 who own their home. Besides this distinction, there are other factors that differentiate between a reverse mortgage and a regular one:
- Reverse mortgages pay homeowners either a lump sum at the outset, a monthly payment or a line of credit depending on their choice. In a regular mortgage, the homeowner must pay the lender an amount towards the interest and principal each month.
- Borrowers do not have to pay a single dollar of a reverse mortgage back unless they move out of the home for a period of 12 consecutive months or more, die (in which case the repayment is from the sale of the home) or sell the house. Regular mortgage owners must make a monthly payment no matter what the circumstances.
- The cash received from a reverse mortgage can be used for any purpose whereas the money from a regular mortgage must go towards buying property and furnishing or improving it.
- You don?t need to meet income and credit rating criteria to qualify for a reverse mortgage while the same two factors are the basis on which your regular mortgage is decided.
- With regular mortgages you run the risk of foreclosure if you?re unable to meet even a single payment. Reverse mortgages allow you the luxury of never having to lose the roof over your head no matter what.
- With reverse mortgages, you start out with zero debt and full equity in your home only to see your debt rising and your equity falling with each subsequent payment you receive. It?s the exact opposite scenario with regular mortgages where you start out with hundred percent debt and zero equity, and as time goes on and regular payments are made, build up equity and scale down debt.
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This article is contributed by Sarah Scrafford, who regularly writes on the topic of international property for sale. She invites your questions, comments and freelancing job inquiries at her email address: sarah.scrafford25@gmail.com.
Original source: http://generouspeople.wordpress.com/?p=574
