Reverse Mortgages For Seniors
In these times of financial insecurity, many of us are struggling to make ends meet, none more so than the elderly. However, reverse mortgages for seniors are an option to relieve monetary stress should it start to become overwhelming for them.
While they may not be the answer for all, they can be the ideal solution for many who are facing monetary difficulties.
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 some non negotiable stipulations though, including…
- The age of the homeowner must be over 62
- The house must be either paid in full or with just a small balance left 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
The method behind a reverse mortgage is simple. The homeowner is given a loan based on the equity in their home. The amount of the loan is dependent on the value of the home and the level of equity.
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.
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. Full repayment of the mortgage is due when one of the following occurs:
- The homeowner dies
- Sale of the house by the homeowner
- The homeowner takes up long-term residence at the home of another family member or at a nursing home
So, there are clearly some major benefits to be had from reverse mortgages. It should be noted, however, that there is a large closing fee due when the mortgage papers are signed; larger than the costs associated with a traditional mortgage.
As with any financial decision, all aspects of reverse mortgages for seniors should be closely examined before signing the paperwork.
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.
