Letís start on a positive note, you could do what most borrowers do and
opt for the reverse
mortgage line of credit. Just think about how you would then be able
to draw on the loan whenever money is required for daily living expenses,
medical bills, prescription costs, home repairs, etc. A reverse mortgage
could really enhance your retirement years including in-home care expenses
in later years.
Furthermore, your reverse mortgage income does not affect
regular Social Security payments or Medicare benefits. And lenders cannot
foreclose on the loan for the life of the borrower.
Okay, thatís all well and good but how do I turn the major disadvantages
of a reverse mortgage into a positive? Itís all in the perspective.
For every negative there is a positive to obtaining a reverse mortgage.
Itís true a reverse mortgage loan may affect your eligibility
for state and federal government assistance programs such as Medicaid but
it also gives you an important financial cushion and does not (as
mentioned above) affect your regular Social Security payments or Medicare
You also have no monthly payments to make. Granted, the amount you owe
continues to grow larger over time but you also have more cash on hand to
enhance the quality of your current lifestyle.
Look at it this way, you will now have all the money you need (and want).
After all, itís your money. True, you wonít have the full selling
price of your home to leave your loved ones but if theyíre financially
sound in their own right, do they really need a substantial inheritance?
It all comes down to whatís important to you, what your current
financial needs are and if
leaving money to heirs is something you feel you need or want to do.
Now letís take a look at the basics of a reverse mortgage.
A reverse mortgage is essentially a special type of loan that
seniors can use to convert the equity in their homes to cash. At one time,
the only way to get money from your home was to sell it and move or borrow
money against it.
One of the pros of a reverse mortgage is that you continue to
own your home and the lender
instead makes payments to you.
Certain qualification requirements must be meet in order for
mortgage loan to take place.
*All homeowners looking to obtain a
mortgage loan must be at least 62 years old.
seeking a reverse mortgage loan must undergo mandatory counseling
from a HUD (the U.S. Department of Housing and Urban Development) approved
counselor prior to actually applying for a reverse mortgage. This
counseling is essentially an in-person or telephone session that outlines
the process and is used to determine eligibility.
*As with a conventional mortgage there are certain costs involved in
the reverse mortgage process. Costs may include application fees,
closing costs, insurance, appraisal fees, credit report fees, and quite
possibly a monthly service fee.
reverse mortgage loan requires no repayment for as long as you live
in your home. When the home is sold and the borrower moves, or the last
living borrower dies, the loan must then be repaid. In most cases, the
home is sold to repay the mortgage.
The borrower however is still responsible for property taxes, insurance
and repairs. If these payments are not maintained, the loan could become
due in full.
As discussed previously you need to seriously examine any disadvantages
of a reverse mortgage as well as any advantages.
Disadvantages of reverse mortgages could include tax
consequences but remember a reverse mortgage is not classed as
taxable income. Your perspective and how you want to make your home work
for you is the key to using a reverse mortgage to your benefit..
Please know too that the amount of money you may receive from a
mortgage depends on
several factors of which include your age and the type of reverse
mortgage selected as well as your appraised home value and current
interest rates. As a rule, the older you are, the more valuable your home
and the less money you owe on it Ė the greater your pay out would be.
That said, you need to determine for yourself if the advantages
outweigh any disadvantages of a reverse mortgage. Remember, itís
a personal choice. What might be right for one homeowner may not be right
for the other.
The bottom line is a reverse mortgage can be a beneficial loan product
when entered into with a full understanding of the advantages and disadvantages
of a reverse mortgage. For seniors who are in need of money to cover
growing expenses and to enhance the quality of life in their later years
it can be a real blessing.