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 age of the homeowner must be over 62
- 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
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 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. 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
- 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
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.
Learn More : Reverse Mortgages For Seniors
