The three main characteristics that make a reverse mortgage different from other types of mortgages are:
- There are no mandatory payments required until what is known as certain 'trigger' events take place. These trigger events include your death or that of your spouse or partner if their life outlasts your own, the earlier sale of the property, your leaving the property or a breach of the contract occurs.
- There is no fixed term as there is in a normal home loan as a reverse mortgage lasts until the death of the surviving owner or one of the other 'trigger' events occur.
- Interest is charged and compounded over the life of the loan.
- Be at least 60 years old, in most cases, and where there is more than the one borrower the youngest determines the age eligibility.
- The amount that will be loaned will depend on the lender's own policy. This is usually calculated by taking into account the applicants age, as the older the applicant the larger the amount available to be borrowed.
- Another factor will be the value of the property itself as the more valuable the larger the size of the loan also. The loan to value ratio (LVR) will refer to the amount advanced against the value of the property, the maximum LVR is commonly around 50 percent or lower.
- The minimum amount can be as low as $10,000 or any other specified amount.
- If there is an existing mortgage held over the property it must first be repaid in full as the reverse mortgage provider has to own the only mortgage being secured by the property.
- The property will need to be valued on a periodic basis with the cost either borne by yourself or added to the loan amount.
- The location of the property may also be a factor.
This article was written by John from Home Loan Finder. Visit Home Loan Finder to compare reverse mortgages today.