Reverse Mortgage For Retirees

A reverse mortgage is just one of the many options available for retirees to gather additional funds from their home equity in case they might need them. Essentially, a reverse mortgage is a loan taken out from the equity of your own home. The only difference is that the homeowner does not pay for the loan during his or her lifetime as long as the owner has not sold it and is still living in it. Payment of the loan starts either when the homeowner dies or when the said property is sold.

How Reverse Mortgage Works

A reverse mortgage is different from a typical home loan or second mortgage in that no repayment on the part of the homeowner is required as long as he or she remains as the principal resident in the property involved. The lender usually makes payments based on a certain percentage of the home equity. Repayment is only done when the actual owner no longer occupies the property. The lender may either sell the home in order to recover the loan provided.

Reverse Mortgage Requirements

There are basic requirements for a certain individual to qualify for a reverse mortgage. According to the Federal Housing Administration, those qualified for a Home Equity Conversion Mortgage (HECM)of the FHA must be 62 years old or older. They must also be principal homeowners and should have low mortgage payments on the property that can be paid off using the proceeds of the reverse mortgage funds. The homeowners should also consider the home property involved to be their principal place of residence.

Reverse Mortgage Advantages

A reverse mortgage is quite an advantageous option that senior homeowners may want to consider. Seniors do not have to worry about not being able meet mortgage payments since the said loan does not require repayments as long as the individual still lives in the home and considers it a primary place of residence. They also do not have to worry about

moving out of their homes in case of failure to repay. Seniors can use their reverse mortgage payments to supplement their retirement income without worrying about future repayments as long as they follow the requirements.

Just like any other type of loans, seniors and retirees may still need to carefully think of their decision of whether or not to avail of a reverse mortgage. It may offer certain advantages, but it may also impact other aspect of a retiree’s life. Seniors should be able to get adequate knowledge on how reverse mortgage really works and if they really have a need for it.

 

 

Posted by Ardent Editor on Apr 15 2010 in Money 101

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