What Is A Reverse Mortgage?
Reverse mortgage has become a very popular option in recent times, especially among senior citizens who own a house, but have no source of income. Reverse Mortgage provides them with either capital or regular income in return for the deeds of the house. What does this mean?
Reverse mortgage is the exact opposite of a mortgage. In the case of a mortgage, you borrow money from a financial lender to purchase a house. You then have to make monthly payments towards repaying your loan. You also have to pledge your house to the lender until you have repaid the entire loan. When the tenure of the loan is over and the loan has been completely repaid, the title of the house is returned to the homeowner.
On the other hand, in the case of reverse mortgage, the title of the house is surrendered to the lender in return for a lump sum amount or regular monthly income. Once the tenure of the loan is complete, the lender becomes the rightful owner of the property.
Reverse Mortgage can be a contract of a fixed period. But, in most cases, it extends until the death of all borrowers. This means that until their death, borrowers can be assured of a regular income and the rights to the house.
A reverse mortgage can be availed even if the house is yet to be completely paid for and still has mortgage payments to be made. In such cases, the title is first cleared by making the outstanding payment to the original lender and providing the borrower with the balance from the loan amount.
