Are Reverse Mortgages a Good Option for Seniors?
Reverse mortgages for seniors are a way to provide funding for seniors. A reverse mortgage allows a senior to tap into the equity in their homes and use it to supplement their monthly income. The loans are offered through lenders that include mortgage companies, banks and insurance companies. An HECM Reverse Mortgage, which is a Home Equity Conversion Mortgage, is the only type of reverse mortgage that is insured by the federal government. These mortgage loans are provided to seniors through Federal Housing Authority (FHA)-approved lenders.
Advantage of Reverse Mortgages
An advantage of a reverse mortgage loan for seniors over other types of loans is the fact that the loan does not have to be paid back. This is provided that the senior is the homeowner and the property is their primary residence. The loan has no credit or income requirements and limited closing costs.
The reverse mortgage loan can provide a fixed monthly amount, which a senior can use to fund any immediate financial needs. It can also be provided a an open line of credit. The line of credit is accessible to the borrower for whatever need and use they desire.
Considerations for a Reverse Mortgage
A senior must be 62 years and live in the property. As easy as the loans are to get, a senior borrower should be sure they want to tap into their equity. Furthermore, a borrower should understand the terms and conditions of the loan. With an HECM reverse mortgage, there is a mandatory counseling session provided through the lender that provides information about the loan.
If the home is sold or the homeowner dies, the loan must be paid in full. This is also true if the senior moves to another primary residence, fails to pay property taxes or maintain an adequate level of insurance protection on the home, or does not perform the necessary upkeep on the home. Understanding the terms and conditions will help a senior enjoy the proceeds of reverse mortgage without fear of losing their home due to neglect or non-compliance.