How Reverse Mortgages Can Benefit You

For many senior citizens, the retirement years can be plagued with contrite retrospection. A lack of sufficient financial planning can leave these with little to live on, and Social Security Retirement benefits are barely enough to survive on.

What options do retirees have if they find themselves in a dire financial situation? One solution that has become more and more common is to take out a Reverse Mortgage.

1. With a typical Home Equity Loan or Line of Credit, a borrower simply adds to their monthly debt burden. But with a Reverse Mortgage, payoff of the loan is deferred until the homeowner has deceased.

2. The homeowner retains ownership of the property and can continue to live in the home. If the loan was taken out by a couple then when one spouse dies, the surviving spouse is allowed to remain in the home until they too have passed away.

3. If the homeowner was still burdened with mortgage payments, these are now done away with.

4. Funds from the Reverse Mortgage can be dispersed in a lump sum, on demand as needed, or a combination of these. These funds can also serve as a monthly stipend to supplement existing Social Security Retirement benefits.

5. When the time comes to settle the loan, the lender recoups the amount of the loan plus interest. Should the home appreciate in value then the heirs will still have something to inherit since they’ll receive the difference between the increased equity and what is due.

1. Should the homeowner need to be hospitalized or placed in nursing home for an extended period of time, it’s possible that the loan will become due and payable.

2. The homeowner is still responsible for the payment of mortgage insurance, homeowner’s insurance, real estate property taxes, and upkeep of the home.

3. Just like conventional mortgages, reverse mortgages come with closing costs. But with reverse mortgages these front load costs are higher. Lenders tend to benefit greatly by these higher fees and that is why they are so eager to offer this type of mortgage.

4. In most states the primary residence is not counted as an asset for the purpose of determining eligibility for Medicaid. But if the equity is converted to cash that is no longer the case. The funds received from a reverse mortgage can adversely affect a senior’s ability to receive Medicaid.

For a homeowner 62 years of age or older, a Reverse Mortgage can be an attractive option for turning home equity into cash. On the surface this method of cashing in on the equity in one’s home appears ideal. But as with all things financial there is the fine print to take into consideration. Each individual or couple will do well to weigh in various factors of their personal situation before signing on the dotted line.