Finance For Seniors : Reverse Mortgages

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.

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 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

- 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

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 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. The funds received by the homeowner can be used in any manner he/she desires; paying bills, making home improvements, taking a trip or any other purpose.

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:

- The homeowner dies

- 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. 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.

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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