Increasing Use of Reverse Mortgages by Senior Citizens
By now, the concept of reverse mortgages is already familiar territory, for many senior citizens. As restricted cash flow dampens their lifestyle, more and more seniors are finding that reverse mortgage loans are saving them from having to live precariously on the edge. Having to bag groceries just to make ends meet is not fun.
But what is a reverse mortgage? Is it like any other mortgages and loans on the market today?
A reverse mortgage is similar to a regular mortgage, since they are both loans based on houses. However over here the debt is not repaid until the borrower dies or sells the house. The debt gets larger with time before it is paid off.
Reverse mortgage loans are not specifically a niche for senior citizens. However the majority of those who avail of this debt facility are America's gray haired seniors. Feeling the pinch of having to stretch their pension money amidst the rising costs of living makes this loan a strong option. Reasons can be more biological than anything else. With decidedly aged bodies, new income-earning opportunities for seniors are limited.
Financial specialists recommend reverse mortgages for senior citizens who own their homes but are short on cash flow. The loan can be paid to them in a lump sum or through monthly payments.
The amount of the reverse mortgage is determined by four factors: (a) the fair market of the house, (b) the age of the borrower (homeowner), (c) the qualified interest rate of the mortgage, (d) the maximum loan amount of the county where the borrower is based.
The loan given to the homeowner is based on life expectancy. In general, the older you are at the time of the loan, the more money you will get. A 62 year-old, for example could borrow $110,000 through a reverse mortgage if he has $250,000 in equity. On the other hand, a 76 year-old septuagenarian could borrow $149,000 for the same equity amount. Use a reverse mortgage loan calculator to see what you might be eligible to receive.
The Reasons Senior Citizens Should Get a Reverse Mortgage
There are many reasons why senior citizens are choosing to convert their home equity into cash through reverse mortgages. Although it still is debt that needs to be repaid sooner or later (more on "later" in this case).
For some, the needs are very real. They may have stopped working, but seniors still have bills and debts to repay. Because of their stage in life, chances are they also need to maintain their long-term care needs, including expensive prescription medications.
Some seniors even need reverse mortgages to pay off high property taxes. In fact, many senior citizens have been saved from having their homes foreclosed or having to file for bankruptcy because they took out a reverse mortgage loan.
Still, some seniors take out reverse mortgages for the retirement lifestyle. They use the money supplied by the loan for traveling, improving their homes, or planning their estate for their loved ones. In some cases they take out a reverse mortgage to help their grandchildren through college.
Whatever the reason, it doesn't preclude seniors from seeking a competent financial adviser who knows the ins and outs of reverse mortgages. Math calculations on this mortgage can get very complicated.