Definition: Reverse mortgages, or "reverse home loans," are a type of personal loan where the lender makes payments to an individual's original mortgage for a period of time after the sale of the property. The money made available through the reverse mortgage can then be used to purchase a new property in the buyer's name.
The definition of "reverse mortgage" typically includes the following key components:
1.
Purpose
: The purpose of a reverse mortgage is typically to help an individual or family who are unable to afford their original mortgage due to illness, disability, divorce, or death, but who still wish to maintain their home.
2.
Loans
: The amount that can be made available through the loan is limited by the amount of the loan as well as any other debts on the property.
3.
Interest rate
: The interest rate charged for the loans is typically higher than those offered for conventional mortgages because it allows the lender to cover the cost of making the payments and potentially also make a profit on the mortgage balance.
4.
Terms
: The terms of the loan, which can include an initial repayment period and any restrictions or limitations placed on the borrower by the lender.
5.
Purpose
: It is often used as a replacement for traditional fixed-rate mortgages due to its ability to provide funds at a lower interest rate over time.
In summary, the term "reverse mortgage" generally refers to a type of personal loan where the proceeds from the sale of the original mortgage are used to purchase a new home. The specific definition and purpose can vary depending on the lender's policies and the individual's circumstances.
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