Reverse mortgages are one of the best options for 62 years old or older and interested in having extra financial liquidity. Do you have expenses that you have not prepared for like hospital bills, or maybe you just want to have funds to travel and enjoy the remaining years of your life? If you are, then taking out a reverse mortgage might work for you.
How a reverse mortgage works.
A reverse mortgage is also a loan but the opposite of a home mortgage where you need to pay your lender a monthly premium plus interest. In a reverse mortgage, you can borrow cash against your home and the lender can give you a lump sum check or a monthly installment, depending on how you want your money to be disbursed to you.
The only time that the loan is deemed due is during the death of the borrower or when the home is sold. When applying, as the loan is taken against the value of the home, the borrower cannot get 100% of the home value. If the unfortunate event happens that the borrower passes, the lender then sells the house to pay off the debt. If the amount of the sale is lower than the amount of the loan, then the estate cannot be held responsible to pay for the difference. But if the sale is higher than the loan amount, the difference will be given to the estate.
Downsides of a reverse mortgage.
One downside when taking out a reverse mortgage is the possibility of the living spouse to lose his or her home when the spouse who is the principal borrower dies or transfers to an assisted living facility. The option would be to make both spouses the borrowers so that the other is assured of having a home until death. Otherwise, the surviving spouse needs to pay off the debt or take out an expensive refinancing of loans.
There are certain conditions that a borrower needs to fulfill as well. For one, the house must be maintained well so that the market value of the property remains high. Another requirement is that the borrower needs to live and stay in the property that is mortgaged. Taxes and insurances are also the responsibility of the borrower.
If you think taking out a reverse mortgage is beneficial for you, then go ahead but apply with both eyes wide open as there are instances of fraud and scams that unscrupulous individuals make against the senior citizens.