Are Reverse Mortgages Right For You

An Arizona reverse mortgage is a loan against your home that you do not have to pay back for as long as you live there. With an Arizona reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. No matter how this loan is paid out to you, you don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for an Arizona reverse mortgage, you must own your home and be 62 years of age or older. To qualify for most loans, the lender checks your income and credit score to see how much you can afford to pay back each month. But with an Arizona reverse mortgage, you don't have to make monthly repayments.

So you don't need a minimum amount of income to qualify for an Arizona reverse mortgage. You could have no income and still be able to get an Arizona reverse mortgage. With an Arizona reverse mortgage, there aren't any monthly repayments to make. So you can't lose your home by not making them. You can see how an Arizona reverse mortgage works by comparing it to a "conventional" mortgage - the kind you use to buy a home. Both types of mortgages still create debt against your home. A Debt is the amount of money you owe a lender. It typically includes cash advances made to you or for your benefit, plus interest. Home equity means the value of your home (what it would sell for) minus any debt against it.

For example, if your home is worth $300,000 and you still owe $120,000 on your mortgage, your home equity is $180,000. When you purchased your home, you probably made a down payment and borrowed the rest of the money you needed to buy it from an Arizona reverse mortgage company. Then you paid back your traditional conventional mortgage loan every month over many years. During that time your debt decreased and your home equity increased. As you made each repayment, the amount you owed (your debt or "loan balance") grew smaller. But your ownership value (your "equity") grew larger. If you eventually made a final mortgage payment, you then owed nothing, and your home equity equaled the value of your home. In short, your conventional mortgage was a "falling debt, rising equity" type of deal. An Arizona reverse mortgage has a different purpose than conventional mortgages do. With a conventional mortgage, you use your income to repay debt, and this means that equity is built up in your home.

But with an Arizona reverse mortgage, you are taking the equity out in cash. So with an Arizona reverse mortgage your debt increases and home equity decreases. It's exactly the opposite, or reverse, of a conventional mortgage. With an Arizona reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless, of course, your home's value is growing at a high rate. An Arizona reverse mortgage is a "rising debt, falling equity" type of deal. But that is exactly what informed reverse mortgage borrowers want: to "spend down" their home equity while they live in their homes, without having to make monthly loan repayments.

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