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A reverse mortgage is also referred to as a lifetime mortgage. It is a loan that senior citizens of 62 years of age or older can avail of. It is essentially an HECM or home equity conversion mortgage which eligible individuals can borrow against the equity of their homes. The individual need not pay back the loan until they move permanently or sell the home. In the event of death of the borrower, the responsibility of paying back the loan will rest on the heirs. Usually refinancing or selling the home enables one to clear off a reverse mortgage. It must be kept in mind that this type of loan is unique and only reserved for particular circumstances. Senior citizens often find themselves in a situation where their homes are worth plenty of equity but they do not have any cash in hand. A reverse mortgage is meant to provide quick cash to seniors with a home. The elderly may require additional money for a variety of reasons such as medical bills, home repairs or nursing home expenses. For homeowners who are agreeable on bequeathing their homes, a reverse mortgage is a good idea. One can opt for various options for receiving the loan money. Monthly installments as well as a lump sum are available. The money can be used in whichever way the individual wishes. An important point to keep in mind is that the homeowner must take care of any insurance payments and property taxes. If these expenses are not met, the individual will be considered as a defaulter.
There are several pros and cons of a reverse mortgage. On the plus side, an individual is able to keep his title to the home and also does not have to be committed to any monthly installments. The manner in which the money is received is also up to the homeowner. The amount that the homeowner has to repay is nothing beyond the value of the house. This also applies to the heirs of the homeowners. Since credit scores and income are not the criteria for a reverse mortgage, it is relatively easier to qualify for it. However there are also some reverse mortgage disadvantages. A reverse mortgage sometimes carries high closing costs which are much more than those of conventional mortgages. Insurance, repairs and taxes have to be borne by the homeowner. Also, the interest is applied on the outstanding balance and this elevates the debt of the homeowner.
Elderly homeowners that are considering a reverse mortgage must educate themselves thoroughly before making a decision. Counseling is required before applying for a reverse mortgage so that the individual is provided with adequate reverse mortgage information and all doubts are resolved. A reverse mortgage calculator helps to determine if a homeowner has enough equity in their homes to qualify for a reverse mortgage. Reverse mortgage solutions can also be provided by a real estate agent who will be able to list the house for sale and also contact mortgage lenders.
