How Forward Mortgage Differs From Reverse Mortgage
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.
That is where the reverse mortgage line of credit comes in. A reverse mortgage allows the homeowner to convert part of their homes equity into cash. In other words, the equity that is built up throughout years of mortgage payments can be paid back to the homeowner.
This is very unlike the traditional mortgage, such as the home equity loan of the second mortgage, because the money that is borrowed is not repaid until the homeowner no longer uses it as their primary residence. The loan amount may also increase with the age of the borrower because the amount of equity they have accumulated throughout their life.
To get a reverse mortgage, excellent credit is not required, nor does a steady income have to be coming in. The main factor is that the person doing the borrowing is actually the owner of the home.
The opposite of the reverse mortgage is the forward mortgage. This is the type of mortgage that is used when the house is purchased. This is when the borrower should have good credit and a steady income source. If the payments are not made on time, the home can be foreclosed upon because it is the home, or asset, that secures the mortgage.
As payments are made on a forward mortgage, the equity within the home grows. This is because it is the difference between the amount of the mortgage and what has been paid into it. Once the last payment is made, the homeowner then owns the home.
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.
For those individuals wondering what makes a reverse mortgage so different from a forward mortgage, the differences are evident. This should also help anyone needing additional monthly income decide whether or not a reverse mortgage line of credit is best.
That is where the reverse mortgage line of credit comes in. A reverse mortgage allows the homeowner to convert part of their homes equity into cash. In other words, the equity that is built up throughout years of mortgage payments can be paid back to the homeowner.
This is very unlike the traditional mortgage, such as the home equity loan of the second mortgage, because the money that is borrowed is not repaid until the homeowner no longer uses it as their primary residence. The loan amount may also increase with the age of the borrower because the amount of equity they have accumulated throughout their life.
To get a reverse mortgage, excellent credit is not required, nor does a steady income have to be coming in. The main factor is that the person doing the borrowing is actually the owner of the home.
The opposite of the reverse mortgage is the forward mortgage. This is the type of mortgage that is used when the house is purchased. This is when the borrower should have good credit and a steady income source. If the payments are not made on time, the home can be foreclosed upon because it is the home, or asset, that secures the mortgage.
As payments are made on a forward mortgage, the equity within the home grows. This is because it is the difference between the amount of the mortgage and what has been paid into it. Once the last payment is made, the homeowner then owns the home.
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.
For those individuals wondering what makes a reverse mortgage so different from a forward mortgage, the differences are evident. This should also help anyone needing additional monthly income decide whether or not a reverse mortgage line of credit is best.
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