Seniors Citizen Reverse Mortgage
Facts / Tips About Mortgages that Pay Income to Seniors and Elderly
Feb 16, 2008
This is a senior citizen introduction to obtaining and committing to reverse mortgages. More information should be pursued from loan and legal experts before making this important decision.
What is a Reverse Mortgage?
A reverse mortgage is a loan against one's home that requires no repayment for as long as one lives in that home. There are no monthly payments, so an upside is that one cannot lose their home due to non-payment. However, the equity in the home may be used up. Opposite of a regular mortgage, payments are made to the home owner from the loan company.
Who Is Eligible for a Reverse Mortgage?
There are no income requirements, as the loan does not need to be repaid as long as the owners stay in the home.
Applicants must own their home outright (or have the mortgage paid off by an advance from the reverse mortgage), and generally must all be at least 62 years old.
The home under consideration for a reverse mortgage generally must be one's "principal residence" (as opposed to a rental home). One must live in the house more than half the year.
Most single-family properties, two to four unit buildings and some other real estate are eligible.
Most mobile homes (or trailer park homes) are not eligible, but there are sometimes exceptions when they are manufactured homes on a permanent foundation and have been converted to "real property" (usually on a piece of land one owns).
What the AARP Says about Reverse Mortgages:
According to the AARP (a senior advocate group), the cash one receives from a reverse mortgage can be paid in several ways:
- Funds may be issued in a single lump sum of cash.
- Funds may be doled out as regular monthly cash advances.
- Funds may be issued as a "credit line" account.
- Also, funds may be given in a combination of the above payment methods.
The AARP also warns on their website, that when one's loan becomes due and payable, one may end up owing the loan company money. They say: "If you have the loan for a long time, or if your home's value decreases, there may not be any equity left at the end of the loan."
Of course, the equity in one's home may also rise, as real estate generally rises in value over time.
Fees and Considerations Involved with Getting a Reverse Mortgage
One should and in some cases, must, see a counselor before entering into a reverse mortgage.
See the AARP Reverse Mortgages Costs page online to explore the costs of setting up this kind of loan (such as an origination fee to 2% of your home's value, closing costs from about $2,000 to $3,000 appraisal fees and more.
Getting a reverse mortgage is a big and potentially costly decision. People considering this option should be sure to read and learn about them and consider all other choices as well.
For more information about senior living, see Active Seniors Unique Adventures, Retirement Planning for Seniors, Gift Tips for Less Active Seniors, and this Squidoo Seniors page.
Resources
AARP (Reverse Mortgage Costs page link above)
Clark Howard, Financial Expert (Radio Program Host)
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