by Craig Romero, Mortgage Analyst, www.wisemortgageinfo.com
Reverse mortgages are becoming more and more popular every day. This is not surprising, considering senior citizens are facing an increased cost of living and decreased sources of revenue. The average social security check doesn’t cover even the most basic living expenses of the typical senior citizen. Up until recently, senior citizen homeowners faced having to sell their homes and moving into low income senior housing to afford a basic standard of living. Reverse mortgages now offer a solution to that problem.
There are many benefits to a reverse mortgage. Seniors no longer have to sell their homes in order for them to be able to afford their medications or to have extra spending money. Reverse mortgages allow them borrow against the equity in their homes. There are no payments due on the mortgage for the entire time that the homeowner lives in the home, making this option an affordable solution to a financial crisis. This turns the home into a source of income for the homeowner, and puts the home’s equity to work for them. Other benefits that a reverse mortgage offers is the income received from the reverse mortgage is tax free and there are no minimum income requirements to qualify.
There are some things that must be considered when one is thinking about taking advantage of the benefits a reverse mortgage has to offer. While a reverse mortgage is the answer for many, it is not for everyone. Sure, it’s great to have access to extra cash, but you want to make sure that you’re not sacrificing something else in the process.
There are many government aid programs that senior citizens qualify for when they meet certain income and cash asset criteria. If a senior citizen is participating in one or more of these programs, they need to make sure that their benefits will not be affected by the income that would be generated by taking out a reverse mortgage.
Many seniors also do not like the fact that the homes that they worked so hard to own free and clear will now have a large debt against it, even though the debt will be paid off from the proceeds of the sale when the home is sold. The heirs of the individual taking out the mortgage generally do not like the idea of a reverse mortgage since it cuts deeply into their inheritance amount, since the equity in the home is being borrowed against and is no longer an asset. However, it is important for the homeowner to do what is right for them, and not necessarily their heirs.
It is important to weigh both the pros and the cons and determine what is right for you in your specific situation and circumstances. Reverse mortgages can be an invaluable benefit for many, but is not right for everyone.
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