reverse mortgage

What is Reverse Mortgage?

Many people are worried about the issue of retirement funds, which is often talked about in the news these days. Meanwhile, “reverse mortgages” are attracting more attention. It is a product that allows you to borrow retirement funds with your home as collateral while continuing to live at home. This product is also recommended for people who want to enrich their life in old age. If you have a home that can be used as collateral, it is one way to consider it as a source of funds for living a long life in old age. Some people may consider moving or remodeling when they get old, due to problems such as aging or inheritance. In this case, you can also choose “Reverse Mortgage”.

Reverse mortgage is a system that borrows money to live with your home as collateral, continues to live in your own home, disposes of the property that was collateral when the borrower died, and pays back the borrowed money. So to say, you can say that this is a credit system for the elderly. With a mortgage, you usually pay off the loan amount received in a lump sum each month and eventually the balance of the loan runs out. However, a reverse mortgage is a mechanism to pay off the balance of borrowed money every month or in a lump sum at the end. For this reason, the name “reverse mortgage” is given.

reverse mortgage

Commercial-type home retirement loans, which refer to homeowners who own home assets and use the value of their own home to obtain a loan. Financial institutions stipulate that the age of applicants for homeowners varies, usually between 60 and 65 years old. The purpose of this loan is to convert equity into cash income and the house is collateral for a reverse mortgage, Over the life of the loan, the borrower’s (homeowner’s) debt will increase and the home’s equity will decrease. The amount of the housing pension loan depends on the value of the property. As a rule, the solvency of the borrower can only apply for a mortgage loan.
But a reverse mortgage will depend on the value of the homeowner’s property to determine the monthly payment.

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In old age, many people will use their pension income to cover their daily living expenses. However, if you have mortgage payments left after retirement, you may find it difficult to repay your mortgage. Therefore, it is possible to refinance from a mortgage to a reverse mortgage. People over the age of 60 who provide their own self-use residences as collateral can apply for loans from financial institution, After the quota is approved, you can receive a certain amount of money stably every month, at least until the age of 95.

The same points as housing pension loans and general mortgage loans:

  • Both require collateral (real estate)
  • Similar to general mortgage rates

The difference between housing pension and general mortgage loan:

  • Only available to senior citizens (with age restrictions)
  • Compared with ordinary loans, it is relatively easy to apply for
  • Continue to receive bank loan grants on a regular basis, rather than taking out the whole loan at one time and making regular repayments

When the homeowner applies to the bank for an annuity, the homeowner mortgages the home to the bank, but the ownership and use rights remain with the homeowner (borrower).
If the loan is later repaid, the home reverts to the owner or heirs. Since the principal + interest repayment will change to the “interest only” repayment, the monthly repayment amount is expected to be reduced. Although it depends on the financial institution, the loan amount is often limited to about 1 million US dollars, so you can consider using it in any way. If you want to keep your home as an asset, you can pay off the original amount during the term of the borrowing.

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