What is Reverse Mortgage, It’s Eligibility and How Does it Work?

Many retirement plans and savings are available in the market to give a comfortable life after retirement. Almost every person plans and saves for this stage of life. Increasing cost of living has made it a little difficult. Here is a solution for homeowners to get a comfortable retirement life. Reverse mortgage is a kind of loan for senior citizens above 62, having equity in their home. Let's learn more about what a reverse mortgage loan is and how does it work?

What is a reverse mortgage?

A reverse mortgage is a mortgage loan which is typically for older or senior homeowners which gives them direct access to the home equity they've built up in their properties while deferring loan payments until they pass away, sell their residences, or vacate the property. The interest on a reverse mortgage is added to the loan total each month because there are no necessary mortgage payments.

Eligibility for reverse mortgage loan

• Anybody above the age of 60 can apply for a reverse mortgage loan.
• Must own a house or in case of a couple, one of them must have a house.
• Minimum 20 years of the property ownership.
• Rented property or property used for commercial purposes is not eligible.

Required documents-

• Identity proof
• Address proof
• Property papers
• Statement of accounts of the last 6 months of all banks having an account.
• Statement of loan of last one year

How a Reverse Mortgage Works?

As other loans, In reverse mortgage in spite of the homeowner, the lender makes payment. It is upon homeowners how they want to receive the payments and are only required to pay interest on the money they actually receive. The homeowner pays nothing up front because the interest is rolled into the loan balance. The home's title is also retained by the owner. The homeowner's debt grows during the course of the loan, while home equity declines.

In reverse mortgage proceeds from the sale of the home directly goes to the lender after the homeowner moves out or passes away to pay down the reverse mortgage's principal, interest, mortgage insurance, and fees.in case of excess amount of selling proceeds over the loan amount is given to the homeowners (if they are alive)or to their estate (if the homeowner died).