The whole idea of the reverse mortgage is to arrange more cash money for the seniors, who own a home, where they have equity left. These people are so called cash poor, but equity rich people. The home equity is usually the only source of an extra money they have.
When the income level has fallen, and some extra expenditures have appeared, many seniors have real financial problems. The present lifestyles of the seniors mean, that many want to consume and to live the full life. The healths of the seniors make it possible, so why not.
1. The Reverse Mortgage Eats, What The Conventional Mortgage Has Saved.
One angle to look at this situation is, that with the conventional mortgage a senior has saved money for some purpose in the future. Now when he has retired and met some unexpected costs, it is the right time to take these funds into use and to take the reverse mortgage.
2. A Senior Will Decide How The Lender Will Pay To Him.
The purpose of the money dictates, how the payment schedule will be arranged. But it is a senior, who tells to the lender, how the lender will pay to him. The alternatives are the lump sum, the monthly payments, the credit line or the combination of these all.
3. The Interest Rate Choice Is A Key Decision
The interest rate plays a key role both in the conventional mortgage and in the reverse mortgage, because both are the long term products. The alternatives are the fixed or variable rates. The home price increases during many years can compensate a part of the interest rate costs or be even higher in average every year.
4. The Home Price Increases Bring Some Extra Equity.
A senior, who has taken the reverse loan, will remain the ownership of the property. When we look at the stats of the home price development during the last years, we can see, that the price increases have been always higher than the interest rates. This comes from the ratio between the supply and the demand. This is of course an added benefit to a senior.
5. You Will Never Owe More Than The Equity Of The Home.
The reverse mortgage loan is always taken against the equity of the home, which will be the only guarantee. Additionally a borrower have to take the compulsory mortgage insurance, which is used in the cases, when the home selling price does not cover all the loan costs.
The senior has not to tell his income, credit score or health situation, because the only guarantee is the equity of the home. This is the whole idea of the reverse loan. This means also, that the heirs will never pay the reverse loan from their funds, but everything will be covered from the selling price of the home.
by: Juhani Tontti
About the Author:
Juhani Tontti, B.Sc., Marketing. It is wise to talk thoroughly with the reverse mortgage counselor to collect all the facts before a decision. Visit: reverse mortgage