Reverse mortgage and credit
For reverse financial loan approval, the house owner’s credit ratings, income or savings are not taken in to consideration. The major factors considered while approving reverse mortgage are home value, house equity and age of house owner. This type of loan mainly aims at poor senior citizens who own a house of their own so as to provide them a tension free retirement life. This type of loans never demand repayment until the house owner resides within the house. When the owner dies the loan must be repaid by the family members.
Advantages and disadvantages
The reverse mortgage loan amount can be used for any purpose. You can either use it for the repayment of existing loans. The ownership of the house is retained by the borrower itself. The reverse financial loans can help the senior citizens to turn house equity in to hard cash. It also gives great relaxation for those elder citizens who don’t have liquid cash with them in order to meet their day to day needs or family desires. The major difference between reverse and ordinary mortgage is that in regular mortgage, payments will be of the outgoing type where as the reverse financial loans are given directly to the house owner.
In reverse mortgage, fees like servicing costs, closing costs, etc can be charged by the lender. The loan interest will be added with the balance principal amount on monthly basis so the loan can multiply very easily. And the interest is not tax deductible, if not, the loan is paid in full or partially. The maintenance, repairs, house insurance, etc remains the responsibility of the house owner.
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