Everything Finance

A Reverse mortgage is a program designed by the Government to help senior homeowners who are 62 years or above and do not have any other income to support themselves.

Thus, with reverse mortgage, the senior homeowners can meet their expenses easily without having to borrow from banks or any other institution. It is similar to getting returns from investment, with a difference. Let us have a look at how reverse mortgage works:

How it works?



In reverse mortgage, home is considered as an asset, on which senior homeowners can avail of loan. The following criteria need to be satisfied to avail of home mortgage:

* The age of all the applicants of reverse mortgage should be 62 years or more.
* There is no criteria for income or credit score required
* All properties from 1 to 4, Condominiums that are approved by HUD, PUDs and all homes that are constructed and comply with the HUD standards can avail of reverse mortgage.
* The home should be primary residence of the senior citizens.
* The property should be well maintained.
* The senior homeowners should pay taxes and insurance on the property.

Here is an hecm calculator that you can use.

Pros and Cons of the Reverse Mortgage

Pros:

* Reverse mortgage is a safe loan as it backed by the Government. The property is insured by the Federal Housing Administration.
* The dead investment made in the home can be utilized to earn income and live quality life by senior citizens.
* The senior citizens need not make any mortgage payments or interest payments as long as they stay in the house.
* Upon death of the homeowner, the property is not transferred to the banks.
* Your loan is limited to the value of your house.

Cons

Reverse mortgage is a very good option for the retired personnel to be self sufficient in their old age. However, there are some drawbacks such as:

* The senior homeowner will have to repay any debts prevailing on the loan if he wants to opt in for reverse mortgage.
* When the homeowners die, the reverse mortgage needs to be paid in full by the heirs. For this the property would be sold off and the mortgage would be paid in full. The excess amount would be passed on to the heirs. In the current scenario where the real estate prices are plummeting, reverse mortgage is not an attractive option at least for the heirs as it is a credit line.

Overall, reverse mortgage is the safe and the best option for senior homeowners.