While everybody understands how a mortgage works, there is still confusion revolving around the concept of a reverse mortgage. A lot of financial experts believe that a reverse mortgage is not advisable for financially vulnerable seniors. However, there are reasons why a reverse mortgage for seniors is considered a good idea. Read on to know the benefits of a reverse mortgage.
What is a reverse mortgage?
A reverse mortgage is a loan for citizens who are aged 62 years and above. These loans give senior citizens a chance to convert their home equity into cash. Also referred to as a Home Equity Conversion Mortgage (HECM), the Federal Housing Administration (FHA) insures these loans, and they come with no monthly mortgage payments. The lender may pay the homeowner in the form of a lump sum, monthly payments (for as long as the borrower is residing at home), periodic advances through a line of credit, or various combinations of the options mentioned above.
The eligibility criteria are also quite simple as compared to a conventional mortgage. Any homeowner who is above the age of 62 is eligible for availing of a reverse mortgage for seniors.
What are the benefits of getting a reverse mortgage?
A reverse mortgage for seniors has various advantages. The top reasons to get it are as follows:
The ownership remains with you
The only thing you need to take care of in order to let the homeownership remain with you is to comply with the terms and conditions of the loan, pay the property taxes on time, and maintain the homeowner’s insurance.
There is no hassle of a monthly mortgage payment
As opposed to a conventional mortgage account, you get funds paid to you on a monthly basis without the hassle of counting it in your budget.
Reverse mortgage protects against the real estate fluctuations
If the loan price increases due to a change in the market, you are still insured because these loans are backed by the FHA.
You may choose any method of disbursement
As mentioned above, these payments may be made to you in different forms as per your convenience, thereby making it easier for you to collect the funds.
However, before getting reverse mortgages for seniors, weigh the pros and cons and the terms and conditions of the lender to avoid any hassles in the long run.