Loans and borrowings are becoming an integral part of our lives. Though the ideal situation would be to stay away from loans and borrowings and live within one’s means, it seldom happens that way. Human beings have aspirations and they would always like to move from one level to the next higher level. Hence it is quite possible that they will not be able to meet their aspirations from their available sources of income. They have to look at other options and borrowing from banks and financial institutions are becoming a norm than an exception.
Though there are many types of loans available today, we will be spending time understanding more about reverse mortgages. We will find out what they are and also understand the main features of such loans. However, before doing so we must understand the basic differences between simple mortgage loans and reverse mortgage.
Basics Of Mortgage Loans
There are basically two major types of loans, unsecured and secured. Unsecured loans are given without any security or collateral back up. Simple examples are personal loans, credit cards, payday loans and auto finance Oklahoma City. On the other hand, secured loans are loans which are secured by an asset, property or real estate. They are also referred to as mortgage loan in case of loans against real estate properties. The loans are used only for the purpose of buying a new house or apartment, for buying real estate already owned by somebody or also for the purpose of extension of homes and for making additions and alterations to it. The lenders of course charge interest for the money given as a loan. Mortgage loans usually come with long repayment terms which could run into 15, 20 or 25 years.
Some Myths Associated With Reverse Mortgage Loan
There are some common myths surrounding reverse mortgage loan which one must be aware of.
The title of the home goes to the lender. This is a common myth and it is not true. The borrower continues to retain the title of the property. The reverse mortgage is nothing but a lien against a property.
The loan can be greater than the value of the property. This again is a myth because this is non-recourse loan meaning that either you or your heirs will not be required to pay more than the appraised value of the property.
If you have a mortgage loan running, you will not be eligible for a reverse mortgage loan. This is only partially true. You can use the proceeds of the reverse mortgages to pay off the Oklahoma City mortgage loan and keep the balance with you. In fact, it helps many retirees to come out of debt burden.
What Is The Eligible Loan Amount
The eligibility criteria for a reverse mortgage would depend on a number of parameters. However, the most important criterion is the appraised value of the home. There is no doubt home equity builds up positively with the passage of each year and when it gets translated into appraised value, in many cases it could run into many thousands or even millions of dollars. As a borrower, you must exercise care and caution and borrow only as much as required. This is because it will make repayment easy for you