Reverse Mortgages For Seniors - What Are They? Are They Worthwhile?
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.
While they may not be the answer for all, they can be the ideal solution for many who are facing monetary difficulties.
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.
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 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
- 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.
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.
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
So, there are clearly some major benefits to be had from reverse mortgages. 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 . You can also read more about here.
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