The United States Department of Housing and Urban Development, more commonly referred to as HUD, has long been the leader when it comes to the home mortgage.  Over time, we have watched the world of mortgage grow and evolve.  One option that people need to educate themselves on has to do with the real value of what is reverse mortgage.

A reverse mortgage is actually backed by the federal government even though it is officially a private loan.  With this, the homeowner’s equity is used for a variety of things.  Keep in mind that when answering the question of what is a reverse mortgage and is it a good choice, some restrictions apply.  For instance, this type of mortgage is one available to the elderly with the funds being used at the discretion of the homeowner.

One of the main values when it comes to what is a reverse mortgage is that the homeowner’s income is not checked or even considered.  This means the person could have very little or even no income and still qualify for a reverse mortgage loan.  Of course, as with any mortgage, there are various dynamics that are looked at by the lender in making the final decision on approval.

In answer to what is a reverse mortgage and is it a good choice, there are other things that come into play.  As far as how the money is distributed to the homeowner, there are three options to include taking a lump sum, getting a specified monthly check, having a line of credit, or the homeowner can mix and match the choices.  Keep in mind that paying back on this type of mortgage does not take place unless the homeowner moves, sells the home, or should die.

Now, to determine the answer to the question what is a reverse mortgage and is it a good choice, it is vital to look at the positive and negative aspects.  While many people love the concept of a reverse mortgage, others are a little more skeptical.  Therefore, gaining all the knowledge possible will help in the decision-making process.

Advantages

The first value of what is a reverse mortgage is about having the freedom to spend the money as wanted.  Some people have worked hard a lifetime and now in the “golden years” want to travel the world to enjoy the fruits of their labor.  However, these funds can also come in handy in the case of paying bills or doing major repairs on the home.

However, one of the huge benefits of a reverse mortgage is that for many elderly living on a limited income from savings, pension, or Social Security, these funds can help supplement, making day to day living more manageable.  Then, with the money being non-taxable and with no income restrictions, it is definitely a consideration for a lot of people.

Without verification on income and no monthly payments until dying, moving, or selling, the reverse mortgage is beneficial to many.  For the elderly homeowner, a mortgage such as this allows them to continue on with a certain lifestyle without being overwhelmed.  People who have worked long and hard their entire life can use funds from a reverse mortgage to kick back and enjoy life.

As long as the homeowner owns and lives in the home, no money on the mortgage loan is paid back.  However, as mentioned if the person moves, sells, or should pass away, then the reverse mortgage would then start to be repaid.  In the case of having heirs, anyone thinking about this type of mortgage needs to have a full understanding of all the options and factors since there are a number of variations.

Disadvantages

As you can see from the information provided above, there is tremendous value associated with what is a reverse mortgage.  Unfortunately, there are also some downsides to this type of loan that should be reviewed.  First, there are fees associated with any loan such as application fee, appraisal, insurance, closing, etc.  However, in the case of a reverse mortgage, the fees are typically higher and in fact, there are some lenders that will also tack on a service fee of some kind.

Then, along with the value of what is a reverse mortgage, consider that for the application to be approved and the funding to become available, the house has to be in good order.  This means the structure itself has to be sound and there should be no serious repairs.  Even with this, there is a good note in that if the homeowner were faced with problems of repair, most lenders of a reverse mortgage would simply add the cost into the principal of the loan.

The question of what is a reverse mortgage and is it a good choice is very important.  With a ton of information to decipher, doing your homework and talking to a professional from HUD will help guide you in the right direction.

More information on reverse mortgages can be found here Reverse Mortgage Providers