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Reverse Mortgages

What they are & how you can benefit from them

Many Americans nearing retirement age may be considering options for financing future personal home care. Because many elderly people desire to remain in their own homes rather than move to an assisted living facility or nursing home, they are becoming proactive when it comes to finding ways to ensure that they’ll be able to do just that. Numerous aging Americans have turned to reverse mortgages to help finance the costs of personal home care. A reverse mortgage is a special type of home loan that allows a homeowner to convert a portion of the equity in the home into cash. To qualify for a reverse mortgage, individuals must be at least 62 years of age, own their own home outright or have adequate equity in the home, and live in the home. The amount an individual is able to borrow through a reverse mortgage depends on the individual’s age and the value of the home. In general, those individuals that can receive the most money are the oldest borrowers who have the most valuable homes and who have the lowest loan costs. There are many private sector lending institutions that offer reverse mortgages, and reverse mortgage fees vary depending on the lender. Typically, the monies borrowed through a reverse mortgage will be repaid with interest, and repayment of the loan will not begin until the borrower dies, sells the home, or moves from the home permanently. The majority of reverse mortgages have adjustable interest rates, but there are a few lenders that offer fixed rate loans. The most popular reverse mortgage available on the market today is the Home Equity Conversion Mortgage.
“Those individuals that can receive the most money are the oldest borrowers who have the most valuable homes and who have the lowest loan costs.”
The monies received from reverse mortgages, if a private sector lender is used, can be used to pay off traditional home mortgages and help finance retirement costs, such as personal home care. Monies from the loan are paid to the borrower in a number of ways: 1) Equal monthly payments for as long as the borrower lives in the home; 2) Equal monthly payments for a fixed period of months; 3) A line of credit; or 4) A combination of a line of credit and monthly payments. These option make it easier for seniors to get the money they need, when they need it, in order to pay for costly expenses such as home health care.