Reverse Mortgages For Seniors - What Are They They? Are They Worthwhile?

Posted on November 24, 2009
Filed Under Unemployment Will Cause The Most Foreclosures In 2009! |

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.

So, what is a reverse mortgage? Well, it is a type of home equity loan that requires no repayments until either the property is sold, the homeowner no longer uses the property as their permanent residence, or the homeowner dies.

Since the decision by the bank or finance company is not based on the homeowners income, these reverse mortgages are fairly easy to obtain for the more elderly members of our society, particularly so because they have most of their money tied up in their property, which is what these types of mortgages are leveraged on.

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

- Insurance and taxes must continued to be paid by the homeowner

- Attendance at a mandatory counseling session is required to ensure full understanding of the mortgage process

The method behind a reverse mortgage is simple. A loan is obtained based on the equity in the home, with disbursements available in three different forms. The amounts of the loans will vary, depending on the value of the home and the equity therein.

The homeowner can opt to receive monthly payments, a line of credit or a single lump sum payment; whichever suits their needs best. 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.

No repayments are made in reverse mortgages for seniors. That is to say, no repayment for as long as the homeowner makes the home their primary residence and is still alive. Full repayment of the mortgage is due when one of the following occurs:

- Death of the homeowner

- Sale of the house 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..

As with any financial decision, all aspects of reverse mortgages for seniors should be closely examined before signing the paperwork.

Learn More : Reverse Mortgages Pros And Cons

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