Reverse Mortgage for Senior

A reverse mortgage for senior can be a good option for some seniors as it allows them to draw money from their home equity. It should be considered by those who are over 62 years old, plan on staying in their home but do not have an income or savings.

This article will cover:

• How Do They Work?
• Who Can Qualify?
• How Much Do They Cost?
• How Much Can You Borrow?
• When Are They Repaid?
• Who Should Consider One?
• Drawbacks

How Do They Work?

A reverse mortgage for senior allows home owners to borrow equity. Instead of making payments to the lender, the lender makes payments to the borrower. There are several different options for payments, including:

• A lump sum
• Monthly (as long as the borrower occupies the home)
• Advances through a line of credit
• Combination of any of the above

Who Can Qualify?

Anybody over the age of 62 who owns a home can qualify for a reverse mortgage, if there is adequate equity in the home. The applicant's credit history and credit score are not relevant when applying for a reverse mortgage.

How Much Do They Cost?

As with a normal loan, borrowers pay fees to obtain the money. These fees can be rolled into the loan and financed. Because there are no "standard charges," the fees will vary depending on the lender, third-party vendors and the type of loan selected.

How Much Can You Borrow?

The amount of loan available depends on the type of loan selected, the borrower's age and how much equity remains after paying off existing mortgages.

When Are They Repaid?

They are repaid when a homeowner dies, the house is sold, or a pre-determined term ends, often set at 10 or 15 years.

Who Should Consider One?

A senior who wants to stay in their existing home for the long term, but has no major funds or employment income to draw on and doesnÕt have other options to raise cash.

Drawbacks

They charge interest rates that are usually two to three percentage points higher than a simpler home equity line of credit, which some financial advisors believe to be a better option.

The American Association for Retired Persons (AARP) state that fees and premiums associated with a reverse mortgage on a house that is worth $250,000 may eat up ten percent or $25,000 of the proceeds. Although the fees, charges, and premiums will not come due until the home is either sold or until the borrower dies, the debt continues to accrue over the life of the loan.