What is a Reverse Mortgage?

Can't remember how many times I've been asked "What is a reverse mortgage"? Reverse mortgages are a great way to get a loan using your primary asset. As in all cases of financial lending, the flexibility comes at a price. A reverse mortgage is a loan using your house and is referred to as a "rising debt, falling equity" kind of deal.

To compare reverse mortgage to a more traditional one, the type of mortgage commonly used when buying a house can be classed as a "forward mortgage". To qualify for forward mortgage, you must have a steady source of income. Because the mortgage is secured by the asset, if you default on the payments, your house can be taken from you. As you pay off the house, your equity is the difference between the mortgage amount and how much you've paid. When the last mortgage payment is made, the house belongs to you.

On the other hand a reverse mortgage process doesn't require that the applicant have great credit, or even that they have a steady source of income. The major stipulation is that the house is owned by the applicant. Generally, there is also a minimum age required as well, the older the applicant, the higher the loan amount can be. As well, reverse mortgages must be the only debt against your house.

Differing from a conventional "forward mortgage", your debt increases along with your equity. Instead of making any monthly payments, the amount loaned has interest added to it - which eats away at your equity. If the loan is over a long period of time, when the mortgage comes due, there may be a large amount owed. Furthermore, if the price of your home decreased, there may not be any equity left over. On the flip side, if it was to increase, this could allow for an equity gain, but this isn't typical of the marketplace.

When deciding how to draw money from the reverse mortgage, there are a few options; a single lump sum, regular monthly advances, or a credit account. There are conditions in this kind of mortgage that would warrant the immediate repayment of the loan; the mortgage will be due when the borrower dies, sells the house, or moves out.

Failure to pay your property taxes or insurance on the home will undoubtedly lead to a default as well. The lender also has the option of paying for these obligations by reducing your advances to cover the expense. Make sure you read the loan documents carefully to make sure you understand all the conditions that can cause your loan to become due.

Hope this helps clear up the term reverse mortgages.

Ken Charnely

About the Author:

Ken Charnely is a personal finance enthusiast with http://www.online-loans-pro.com/ dedicated to quality information on online loans. For all your online loan needs please visit and apply for loans online

Mortgage Refinancing - The First Step

Refinancing is the process that involves paying off a current loan with the proceeds from a new loan using the same property as security. However, refinancing may be undertaken with the same money lender or a new money lender. Very often, the objective for refinancing is to reap certain benefits like low rate of interest, flexible repayment terms, releasing equity in your home, etc.

There are assorted types of refinancing like Home mortgage refinancing, Auto refinancing loan, Refinancing car loan, Commercial refinancing and Home equity refinancing loan.

You may refinance in order to release the equity built in your home over a duration of time. Home equity refinancing loan allows you to have finances that you may use for any purpose that you wish. Refinancing car loans allows you to change the money lender for a better rate of interest and proficient loan management. It is the easiest way to avoid paying higher rate of interest on your current car loan.

If you are facing financial instability and cannot pay larger installments, refinancing will prove extremely helpful to you. Refinancing will help you in extending the loan time and paying smaller amount installments as per your paying capability. Thus, you will able to manage the loan amount in a more efficient manner.

There are several money lenders who specialize in providing mortgage refinancing to the borrowers for what ever purpose they need it. Many web sites provide online application forms for availing mortgage refinancing at lower rates of interest. You can compare different offers via the internet and get the best mortgage refinancing that suits you.