Reverse Mortgages

Reverse Mortgage: Does it really make sense?

Traditionally reverse mortgages have been a convenient way for seniors in need of cash to access some of the equity in their home to supplement their lifestyles. I’m coming around to the idea of the concept of reverse mortgages because it’s becoming apparent that they enable seniors to do more than augment their income. Of course I’m probably seeing more merit in them too because I am quickly becoming a senior.

Maintaining one’s independence is a very important priority and a reverse mortgage can make it possible for seniors to extend that independence significantly. Part of maintaining one’s independence has to do with being able to remain in one’s home. The expenses associated with living in a house can often prove overwhelming for seniors who may not have the physical wherewithal to perform maintenance tasks around the house.

This could be one very good way of putting a reverse mortgage to work. For those who are unfamiliar with the concept of a reverse mortgage, it is a financial product that’s exclusively geared toward mortgage free seniors. A reverse mortgage enables seniors to tap into the equity of their home, in some cases by as much as 60% of the total value, without ever having to make a payment. The financial institution advancing the funds will take repayment plus the agreed-upon accrued interest upon the eventual sale of the home or upon the demise of the owner, regardless of how long it takes.

So if you own a home worth $500,000 and you want to take a reverse mortgage, say for 60% of the home’s value, the financial institution advances $300,000 to the senior owning the home and the senior can use these funds in any way he or she wishes without ever having to repay a cent until the home is sold or the senior passes away.

At that time, the financial institution, which has a mortgage secured on the property, is entitled to sell the property and take its principal and interest from the proceeds of the sale, or the senior’s heirs can pay out the principal and interest and keep the home. In either case, any amount above and beyond the mortgage and interest must by law be turned over to the senior’s estate.

Personally, I like the idea of a reverse mortgage. Many seniors don’t because they’re thinking about their children’s inheritance. But then, when you consider that in the United States inheritance taxes are confiscatory, to put it mildly, and probating a will is very expensive; it only makes sense to enjoy the fruits of your labor while you’re still alive. Besides, your grown children should be able to look after themselves without counting on a windfall from your death.

So, does a reverse mortgage make good financial sense? Overall I’d say it does and I think many seniors would benefit greatly by tapping into the equity of their home to help maintain their independence.

Call Toll-Free 1-877-476-9600 to speak with one of our Loan Specialist to find out more about reverse mortgages or to request more information. There is no obligation or cost for their services.