Two valuable things you will learn as you navigate the mortgage market are the concepts of home refinancing and reverse mortgages. Of course, these two are different, but what are their differences? That’s the subject of our blog discussion today.
First, we have a home refinance in Prescott, AZ. It is applying for a new loan that replaces an existing mortgage. In other words, it is restructuring or modifying your existing home loan. Usually, borrowers choose this option to take advantage of a significant drop in interest rates, better terms, or access to equity.
A reverse mortgage, on the other hand, is a financial product that caters to homeowners 62 years and older. The setup lets you convert a part of your home equity into cash – without selling your property. It is worth highlighting that no monthly mortgage payments are required; you typically repay once you move out of the property or you die.
When we talk of mortgage refinancing benefits to your cash flow, it can allow potential savings over time due to reduced monthly payments or access to cash as a lump sum through the equity of your property. A reverse mortgage also provides an avenue to offer a stream of income.
How about the homeownership status? You can apply for refinancing – any homeowner – whether you own the property outright or still have an existing loan. With a reverse mortgage, on the other hand, you should either own the home outright or your home has a substantial amount of equity.
As for loan repayment, as mentioned above, a home refinance in Prescott, AZ, requires monthly mortgage payments until you finish the loan term. Meanwhile, a reverse mortgage does not oblige you to pay monthly dues. The loan repayment happens when you decide to move out or, if the inevitable happens – when you die.
Usually, one can settle the accumulated loan balance when you sell the home.
Are you looking for a reputable mortgage broker to help with your application for home refinance in Prescott, AZ? Look no further than Homeplus Mortgage.