Reverse Mortgage – Ray of Hope for Senior Citizens

March 25, 2010

Author: William M. Davis

Reverse mortgages have become a savior to many senior citizens. Reverse mortgages are a special type of mortgage that allows homeowners to convert a part of the equity within their homes to cash. This equity would have built up over the years from successive mortgage payments. The greatest thing about a reverse mortgage loan is the borrower is not required to repay the loan until after the borrower no longer uses the home in focus as their principal residence. This makes reverse loans more popular than second mortgages among senior citizens, as they do not have any plans of moving to a new home any time soon.

Reverse Mortgage and its Importance to Senior Citizens

Planning for retirement is an important part of anyone’s life. During our formidable years, we try to put some money aside through various insurance and bank packages that mature after a certain number of years. That is the ideal situation. In reality, we all know that things do not always work out as we planned. As we go up in age, the variables increase for illness, deaths, natural disasters and the list goes on. These factors can significantly change the financial landscape and result in senior citizens facing dire financial constraints after retirement. As a result, if they were fortunate to have purchased a home during their working years, then reverse mortgage is one of the best means by which they can raise some much-needed financial support.

How Much Money can Senior Citizens get from Reverse Mortgages?

The amount of money a senior citizen is qualified to receive depends on a few factors. The size of your reverse mortgage depends on the age of the individual, the current interest rate and the appraised value of the home. In general, it is accepted as a part of the industry standards that the more expensive the home, the older the individual, lower the interest rate then the more a senior citizen will be able to borrow. In addition, if your area is one of those with mortgage limits, then the interest rate is either that of market value of that attached to the mortgage limit whichever one is lower. Senior citizens can simply go online and use a reverse mortgage loan calculator to get an idea of their loan size.

How do Senior Citizens Receive their Payments

There are five basic ways in which senior citizen can get the funds generated from their reverse mortgage loan.

• Tenure: In this arrangement, senior citizens will receive equal monthly payments as the borrower continues to occupy the home as their principal place of residence.
• Term: Under this plan, senior citizens receive equal monthly payments over a specific period.
• Line of Credit: This type of payment is issued at times and in amount determined by the senior citizen until the amount expires.
• Modified Tenure: This is a combination of line of the credit and monthly payments.
• Modified Term: This is a combination of line of credit and monthly payments for a fixed period.