I guess many of the people out there understand what is a mortgage but I doubt many will actually know what is a reverse mortgage or reverse mortgage loan. A reverse mortgage is a type of mortgage which allows you to take a portion of your home equity that you have built up and have it as cash. This would be perfect for retirees whom like to supplement their income and helping them to meet ends meet. Also, there will be no worry for you about repaying the loan until you no longer have that particular home as your main residence.
However, you do need to keep in mind that there are certain criteria to meet to get this type of reverse mortgage and should there be something happen to you, your family will be left with the mortgage loan to take care of unless you have made other arrangements for it.
In order to qualify for reverse mortgages, below are generally some requirements.
- You need to have either a single-family home or at least a 2 to 4-unit property which are current residing.
- Your property can be a type of duplex, town home or even a mobile depending on your situation. If you happen to live in a condominium, you need to ensure that it is FHA-approved.
If you have decided to take up a reverse mortgage loan, the next thing you need to make sure of, is to find a reliable reverse mortgage lender that you can trust and know the in and out of it. To start off, you need to speak to a few lenders to find out what are your options. You may wish to check with your personal bank or your original mortgage lender on this too.
Important:
There have been many class action lawsuits that have been filed on behalf of the seniors whom have attempted to utilize reverse mortgage to supplement their income to cover their medical expenses. Lawsuits have been filed against unnecessary fees that have been included which may not even pertain to the reverse mortgage loan itself. Hence it is essential that you know who you are dealing with.
If you have not been borrowing money, you may need to do it in the near future. Borrowing of money will most likely come in the form of loan and understanding which type of loan is suitable for you is essential. There are many different types of loan and each will suit different people with different situation.
The following are a few questions you need to ask yourself before deciding which type of loan is suitable for you.
- How Much Do You Wish To Borrow?
- How Much Equity Do You Have?
- How Long Do You Intend To Borrow Your Money For?
Type 1: PayDay Loan
For any loan amount below $1,000, you should consider taking a payday loan. A payday loan works like you take out a set amount of money and repay back within a month, which is usually on your next payday. Interest rates for payday loans are usually set at 25% so you should honestly speaking, consider other types of loan, or drop the idea of getting a loan.
Type 2: Unsecured Loan
A Personal Loan would suit you best if you want to borrow anything between $1,000 to $25,000. A personal loan is also known as an unsecured loan as it does not have any collateral against them, such as your home, or any of your valuable possession or asset. Since there is no collateral involved, the interest rates are usually higher for personal loan.
Type 3: Secured Loan
When you need a loan above $25,000, it is highly recommended that you should go for a secured loan. This is where you borrow a set amount of money and use your house or asset as collateral, failing to make repayment will result in your house or asset being repossessed by your loaning company. The interest rate will be lower for this type of loan since you are providing your asset as collateral.
I spend some time to write this article because I realize a number of people out there still do not understand what type of loan should they take based on their situation.
My previous article on “What Are Secured And Unsecured Loans?” will explain more about secured and unsecured loans in details.
