Reverse Mortgages

A great deal has been said lately about reverse mortgages which are geared towards senior citizens. For those unfamiliar with a reverse mortgage, it is a type of loan whereby a homeowner can continue to own and live in their place of residence at the same time as they take a portion of their equity and allow it to be turned into money that they can use right now.

A reverse mortgage, as the name implies, works the exact opposite from a conventional mortgage. The homeowner does not make a monthly payment to the lender but the opposite happens- the lender gives money to the homeowner.

Eligibility for a Reverse Mortgage

Your income does not play a role in whether you will be eligible for a reverse mortgage or not. What does matter is that every individual who is listed on the title of the home must be 62 years of age or older (no exceptions are made for adult children living in the residence) and the person or persons listed must have paid off their mortgage or presently have a small portion of money remaining on their mortgage. The title will always remain with you. As well, if the homeowners own more than one house, it is THIS house that must be their primary residence. A reverse mortgage will not work for a summer cottage for example.

The reverse mortgage is an anomaly in the financial world. There can be more than one name on the mortgage but the mortgage remains in effect until the last person listed either moves out of the home, sells the home or dies.

How much money is owed at the end of the loan’s term?  All of the money that was advanced to the homeowner throughout the duration of the loan plus all of the interest that has built up in that time period is the answer.

A reverse mortgage can also work in another unique scenario, i.e. in a purchase transaction. To explain this further, a senior can buy a home but not make any mortgage payments, which runs counter to how a traditional mortgage would be structured.

The Benefits of a Reverse Mortgage

How can this benefit those of an advancing age? If a senior wishes to relocate to be in closer proximity to other family members then mortgage and/or financial worries need not be a deterrent to doing so.

Other benefits to seniors include:

·    Being entitled to an extra monthly income that is not taxable
Or
·    Receiving a lump sum payment
·    Paying for health and medical care needed in the home
·    Paying for long-term care insurance
·    Canceling a mortgage payment that is due and payable
·    Paying for repairs and renovations needed for a home

If you are on a fixed income and fit the aforementioned criteria, a reverse mortgage is something that would be well worth considering. This is especially the case if you   find yourself constantly worried about how you are going to pay this bill or that bill. You can supplement your small income with a reverse mortgage. The money you receive from the mortgage should not affect your eligibility for social security or your need for Medicare.

The Options for a Reverse Mortgage

There are three options for a reverse mortgage if you decide that it is in your best interests. Firstly, you can choose to accept a lump sum of money. The second option is to choose payments on a monthly basis. There is also a third option and this is the one that tends to be favored by most individuals. That option is to accept a line of credit. If you do this then you will be granted access to money any time you require it. The positive side to this is that the money gains interest as time passes and you therefore do not get stuck with a penalty as those for example, who choose the first option, that of receiving a lump sum all at once.