What is a reverse mortgage

							Reverse mortgages are a special type of financing intended for individuals with more than 65
years of age with a title on a residential property.

It is defined as a loan or mortgage with which the homeowner makes provisions, in the form of
periodic or lump sum, up to a maximum amount of a percentage of the appraised value.

Reverse mortgages are a tool to unlock the wealth of assets otherwise inaccessible to some
senior citizens. The financing is designed so as not to provide refunds of any kind, nor for
interest, fees and interest is capitalized and payable only at maturity. Reimbursement, unless
voluntary early repayment is called for, is borne by the heirs and can also be made using the
proceeds from any sale of the house.

The loan is therefore not expected to pay an installment for its entire duration. In some cases
the product may be combined with a contractual provision which limits the value of the debt
payable by the heirs.

In the event that a property appreciates in value following the issuing of a reverse mortgage, the
borrower can take a second or even a third reverse mortgage loan on the grounds of increased
equity in the property. However, not all countries allow several mortgages to be taken on a
reverse mortgage financed property.

The reverse mortgage which is also known as the lifetime mortgage requires that property
valuation is made by an appraisal company and the property is insured against damage.
Logically, the amount of credit, and the amount to be charged will depend on the market price of
the property, and age of the individual who signs the mortgage.

The loan amount is generally between a minimum of 15% and a maximum of 50% of the value
of the property. After the death of the mortgagor, and in the event that the heirs do not want or
can not cancel the mortgage, the credit institution may foreclose and recover the debts with
interest.

The institution can only attain recovery to the extent of assets of the estate, without which the
financial institution has to seek redress by attaching the other personal assets of the heirs.

For the majority of reverse mortgages, the funds can be utilized for any function; although, the
borrower should fix any current mortgage(s) using the funds from the reverse mortgage. Some
types of homes cannot be associated with the reverse mortgage, while others such as mobile
homes must meet special conditions.

Depending on the age of a borrower, the criteria set for accessing the mortgage loans are more
lenient towards much older applicants, as the mortality rate increases with age. To apply for
such financing, lenders usually require a series of documents which include birth certificates,
proof of residence, copy of identity card, photocopy of the tax code, a copy of any certificate of
insurance on housing, last tax return or pension book, etc.