A reverse mortgage is a loan type that an individual gets when they have equity on their home. This equity can be used as a basis to get a loan from a financial institution, which can be accessed in one big amount or even as monthly payments. There are different types of reverse mortgages that are divided on how the money is received.

If the concept of reverse mortgages is new to you, it can be confusing to understand it all at once. To help you out, here are the basics of a reverse mortgage:

• Easy access to funds
  A reverse mortgage is really suited to seniors who have no other means of income. The individual who needs the money can apply for a reverse mortgage and be financially independent in their old age by using their home as an asset. This means that they do not need to ask anyone for financing for medical emergencies or for their daily expenses. This gives a lot of dignity to them in their old age and is very good for the person applying.
• Constant growth of balance
  Many individuals wonder how a reverse mortgage is different in its terms from a normal mortgage. A regular mortgage balance keeps reducing as the person makes payments every month. A reverse mortgage balance, on the other hand, keeps growing as the individual does not make payments but is receiving the money in the account instead or has taken a big lump sum. This is one of the basics of a reverse mortgage that one should understand.
• Older applicants get a higher limit
  One of the basics of a reverse mortgage is to know that there is a limit on the principal. The starting age at which the individual can qualify for reverse mortgages is 62 years. Also, the older you are, the higher the limit you get. This is natural as a younger person may live longer and accrue a higher interest.
• Cancelation is permitted
  If the applicant feels any pressure that they were drawn by a big sales tactic and forced to sign the loan through gimmicks which they did not understand, they can reconsider. There is a period that allows the people who have applied to change their decision and cancel their application for a reverse mortgage. For some companies, this period is around three days but it is always best to check with individual financial companies what their rules are. This is an important point about a reverse mortgage that you should know about.
• Get an accurate estimate on the interest rate
  The lump sum reverse mortgage type, that gives the individual all the money at one time, has a fixed rate of interest. Any other type of reverse mortgage has a fluctuating rate of interest. This is important information that individuals must be aware of before taking a reverse mortgage. There are also fees in place, such as a premium for insurance, which are also to be paid by the applicant. So, know about all the amounts correctly before saying yes to reverse mortgages. Defaulting on any fees can lead to a foreclosure.