Reverse Mortgages for Seniors

In a time of financial insecurity, reverse mortgages for seniors can provide some relief for this age group who are often living on a fixed income.  While it may not be the answer for all, it can be the ideal solution for many who are facing monetary difficulties.

A reverse mortgage can be explained most simply as a type of home equity loan for which no repayment is necessary until the homeowner dies, sells the property or no longer uses the property as a permanent residence.  There are stipulations for eligibility, including:

• Homeowner must be at least 62 years of age.
• The house must be either paid in full or with just a small balance left on the mortgage.
• Taxes, homeowners insurance, mortgage insurance and a hefty closing fee must be paid by the homeowner.
• Attendance at a mandatory counseling session is required of the homeowner to ensure full understanding of the mortgage process.

A reverse mortgage is generally easily obtainable for senior citizens, since the eligibility process does not consider the homeowner’s income or any credit scores. 

The method behind a reverse mortgage is simple.  A loan is obtained based on the equity in the home, with disbursements available in three different forms.  The homeowner can opt to receive monthly payments, a line of credit or a single lump sum payment; whichever suits their needs best.  The amounts of the loans will vary, depending on the value of the home and the equity therein. The funds received by the homeowner can be used in any manner he/she desires; paying bills, making home improvements, taking a trip or any other purpose. 

No repayments are made in reverse mortgages for seniors.  That is to say, no repayment for as long as the homeowner makes the home their primary residence and is still alive.  Full repayment of the mortgage is due when one of the following occurs:

• Death of the homeowner.
• Sale of the house by the homeowner.
• The homeowner permanently leaves the property; i.e., taking up residence in a nursing home, with a family member or hospice facility.

In many cases, a reverse mortgage is a benefit for its recipients.  It should be noted, however, that there is a large closing fee due when the mortgage papers are signed; larger than the costs associated with a traditional mortgage.

As with any financial decision, all aspects of reverse mortgages for seniors should be closely examined before signing the paperwork.