Debt Consolidation Credit Counseling In Phoenix

Retirees obtain most of their income from various retirement accounts, pensions, and social security. However, they may find that these multiple income streams are not adequate. That is when these retired individuals find that they are struggling to make ends meet, even if they budget their money.

When this happens, a reverse mortgage line of credit is usually a viable option. What a reverse mortgage allows is the homeowner is able to take their homes equity and convert it into money. Basically, the equity that has been built up throughout the years in the form of mortgage payments is paid back as income to the homeowner.

This is very unlike the traditional mortgage, such as the home equity loan of the second mortgage, because the money that is borrowed is not repaid until the homeowner no longer uses it as their primary residence. The loan amount may also increase with the age of the borrower because the amount of equity they have accumulated throughout their life.

To get a reverse mortgage, excellent credit is not required, nor does a steady income have to be coming in. The main factor is that the person doing the borrowing is actually the owner of the home.

And then there is the opposite of the reverse mortgage, which is the forward mortgage. This mortgage is what people acquire when they are purchasing the home. This is when good credit and a steady income are required. If they payments are made late or not at all, the bank can foreclose upon the home because it is the home that actually secures the mortgage.

As payments are made on a forward mortgage, the equity within the home builds. This is because the difference between the amount of the mortgage and what has been paid is the equity. Once the final payment is made on the mortgage, the home is finally owned.

However, the reverse mortgage is the complete opposite of the forward mortgage. This is because the debt increases as the equity decreases. The borrower is not making monthly payments, but the equity is eaten up because there is interest added to it as the money is paid out to the borrower.

Then there is a time when the reverse mortgage must be paid back and the amount could be large, which is determined by the length of the loan. Other factors include if the home had decreased at any time and there was no equity left to borrow or if the value increased and the amount to be borrowed increased. This could have an impact on the amount of debt because of the amount of money borrowed or not borrowed during these periods.

When it is time to repay the loan, it is usually the result of the homeowner selling the home because they wish to move into an apartment or an assisted living facility for easier living. They have no more use for the home, so it is no longer their primary residence.

For those individuals wondering what makes a reverse mortgage so different from a forward mortgage, the differences are evident. This should also help anyone needing additional monthly income decide whether or not a reverse mortgage line of credit is best.