Reverse Mortgages, Are They Right For You?
By Charles Hopkins
Published 09/20/2007 | Real Estate
Reverse mortgages or lifetime loans are an increasingly useful source
of revenue for our ageing population. In essence they are a very simple
concept. If you own your own home and have paid up all your mortgages
but this has left all your money tied up in the home, you can release a
percentage of the value of your property with a reverse mortgage.
If you are in the situation where you find that there is no
discretionary spending money available or you are faced with a
financial emergency such as urgent medical needs or home repairs these
sorts of things can run into thousands of dollars. So you really only
have the two choices on a limited income. One you can sell the house
and release funds. That, however, means leaving your much loved home
and may also mean that you are forced to take a less desirable property
in an inferior neighborhood. Sure you free up, maybe 100000 but in the
process you've had some pretty heavy expenses with real estate fees for
selling your home and all the other legal and moving expenses that are
an inevitable part of changing houses.
That is one scenario and one that lots of people employ in this
situation. Less well known but a very viable alternative is the reverse
mortgage. This loan is taken out on the security of your property but
unlike a mortgage there are no payments for the duration of your time
in the home. Interest accumulates and is payable either on your death,
when the house is sold or on you voluntarily selling your home to move
on for whatever reason.
Meanwhile you have had the money to spend at those times of
financial emergency or even maybe to take that trip of a lifetime. You
have not had to move house and you can continue to enjoy your current
lifestyle. Not only that but you can continue to benefit from the
increasing property value of your home.
You may like to use your reverse mortgage to take out a lump sum
and then as property values rise take out further lump sums. You may
even prefer to have a regular monthly payments. Many of the companies
specializing in those types of financial instruments can be very
flexible and if you are over 60 and have no savings then this is
something that you should definitely start to explore.
Fees on these loans can range between very little to very high,
depending on your provider. If your need is urgent and important to
your well being, you may find that you are eligible for government
agency help. In any event check out all your options and get advice on
fees. Perhaps you are going to move house in a year or two anyway and
for a short term loan the fees may make this type of loan uneconomic.
It may be that in these circumstances just a regular loan might be
Despite some drawbacks reverse mortgages are a very useful source
of money for many older people that own there own homes. It is
certainly worth exploring and a way of enjoying the fruits of a
lifetime of work while you are still able bodied. What is the use of
tying up all your money in property until the day you die when you
could be enjoying the use of some of that equity now.