Finance For Seniors : Reverse Mortgages
In a time of financial insecurity, reverse mortgages for seniors can provide some relief for an age group who are often living on a fixed income.
They can represent an ideal solution, and many people have already taken advantage of the benefits that they offer. That’s not to say that they are right for everyone though, which is why it is important to research the ins and outs of them before making a decision.
A reverse mortgage can be explained most simply as a type of home equity loan for which no repayment is necessary until the homeowner dies, sells the property, or no longer uses the property as a permanent residence.
They are generally easily obtainable for senior citizens, since the eligibility process does not consider the homeowners income or any credit scores.
There are stipulations for eligibility, including:
- The homeowner must be at least 62 years of age
- The property in question must have been paid for in full, or have just a small balance remaining on the mortgage
- Taxes, homeowners insurance, mortgage insurance, and a hefty closing fee, must be paid by the homeowner
- The homeowner must attend a counseling session to ensure that they completely understand the reverse mortgage process
What happens with a reverse mortgage is pretty simple to understand. A loan is obtained based on the equity in the home, with disbursements available in three different forms. The amount of the loan is dependent on the value of the home and the level of equity.
This loan can be had in a single lump payment or as a series of monthly payments; it is up to the homeowner to decide which they prefer. Homeowners are free to spend the loan on whatever they see fit to, with paying bills, making home improvements and going on trips being just a few of the options available.
As part of the reverse mortgages for seniors system, no repayments may ever need to be made by the senior citizen. That is to say, no repayment for as long as the homeowner makes the home their primary residence and is still alive. Repayments need only be made in the case of the following occuring…
- Death of the homeowner
- The property is sold by the homeowner
- The homeowner permanently leaves the property; i.e., taking up residence in a nursing home, with a family member or hospice facility
In many cases, a reverse mortgage is a benefit for its recipients. When looking at the benefits though, still bear in mind the fact that a large closing fee may be due on the signing of the mortgage papers. This fee is typically larger than that of a traditional mortgage and it can vary significantly from place to place..
Reverse mortgages for seniors are not a decision to be taken lightly and, as with all financial decisions, all paperwork should be closely examined before making a commitment. Don’t let the paperwork put you off though as professional assistance and counseling is available.
As you or a member of your family reaches retirement you’ll want to read more about reverse mortgages pros and cons. You can also read more about reverse mortgages for seniors here.
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