Today will be discussing how a reverse mortgage works. Reverse mortgages are a way in which older people can access equity which they had built up in their homes over the years in the form of cash. There are some important rules and regulations to understand before embarking into this area of mortgages.
First of all there is the issue of age limitation for reverse mortgages. You must be at least 60 years of age to get a loan of this type. This is because it is meant to be a means to allow you to increase your monthly income from your currently fixed retirement income with the intention that the lien holder will most likely take possession of the home upon your death.
Second there is the issue of interest which is accumulated while you are alive and making payments. You do not have to pay any of this interest or make any type of repayment on the loan as long as you are alive and as long as you do not sell the home. The purpose for these loans is to allow you to increase your monthly income. But there is interest which is apply and added to the loan which will become due at the time of your death or if the home is sold.
So remember that you are slowly increasing the debt which will be held against you. So it is important to understand that it will be difficult for your children to pay the loan in order to recapture the property. If this is a concern, then you should not get reverse mortgages.
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