Understanding the Basics of Mortgages and Reverse Mortgages
November 3rd, 2011 | 
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The Basics of Mortgages
So, what really is a mortgage? This is a type of loan that you that you have to repay over an agreed time frame. Normally, a mortgage is secured by a property such as your home. If you have a mortgage, you are securing a promise that the amount you borrowed from the lender will be repaid in full. For the majority of consumers, getting a mortgage is one of the biggest and most serious financial decisions that they have to make.
There are many lenders that can offer mortgage loans. Banks, for example, are the number one originators of mortgages. You can also get a mortgage from special mortgage lenders, building societies, or you can seek the intervention of a mortgage broker. You can get a mortgage after finding the crucial information you need. It is also possible to get the advice of a financial advisor who will give you recommendations on what type of mortgage would be best for your situation.
In general, there are two principal ways to pay your mortgage. These are the full repayment plan and the interest-only mortgage. With full repayment, you will promise to pay back the loan and the interest for an agreed period. For example, you may negotiate for a 30-year repayment plan with a fixed interest rate.
The other mode of repayment is interest-only. As the name implies, this plan allows you to pay only the interest of the loan for a fixed period. However, you need to build savings or put your money in an investment plan so that you can repay the whole loan when your mortgage becomes due.
Understanding Reverse Mortgage
Reverse mortgages are getting a lot of attention these days. Unlike conventional mortgage, borrowers will not pay anything if they get a reverse mortgage. Instead, the borrower gets a monthly payment or a lump sum from the lender. The funds are actually taken from the home equity that you have built over time.
A reverse mortgage loan is not taxable. This special feature makes reverse mortgage loan extremely attractive. The loan does not affect your Medicare and Social Security benefits. And most important of all, you will retain ownership of the house as long as you are residing in it.
A reverse mortgage will become due once the last borrower passes away. If you no longer live in the house or the property has been sold, then the loan is also up for repayment. You can apply for a reverse mortgage if you are at least 62 years old. Up to three seniors can apply for a reverse mortgage as long as they meet the requirements.
You can get big benefits from a reverse mortgage. This loan can provide a regular income for you. And the funds you get from a reverse mortgage can be used to pay for whatever things you need.
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