Just like all Americans, senior citizens are experiencing a period of extreme financial duress. While most retirees receive social security benefits, others are seeing their pensions disappear as the economy continues to lay waste to companies that were once juggernauts of industry. One of the most popular solutions for older homeowners looking for an easy, reliable way to supplement their income is FHA reverse mortgages.
Recent statistics show that as many as 107,000 Americans receive reverse mortgages every year in the United States. The average recipient is 69 years old. If you or your loved ones are experiencing financial hardship, here is some important reverse mortgage info that can help you decide whether or not this type of loan is right for you.
How Reverse Mortgage Works
Learning how reverse mortgage works is the most important step in protecting yourself financially. In short, a reverse mortgage is a loan given to homeowners against the equity of their home. This should not be read to mean that the lending institution owns your home and all of your belongings. Instead, you should think of your equity as collateral against the loan.
Qualifying for a reverse mortgage is not difficult. Most lending institutions require that at least one home owners lives in the home most of the time. Because reverse mortgages are secured against your equity, they have no credit or income requirements, making them one of the best choices for retirees on a fixed income.
What Are the Benefits of a Reverse Mortgage for Seniors?
Of course, learning how reverse mortgage works is not enough for most potential borrowers. There needs to be some kind of benefit. Luckily, there are myriad benefits to seeking a reverse mortgage loan versus other forms of lent income.
- No Debt is Passed On
- Debt Cannot Exceed Equity
- A Great Source of Income
Unlike other forms of loans, when a reverse mortgage loan-holder passes on, neither the loan recipient nor their heirs can be held responsible for this debt. In many cases, the lending institution will recoup their losses through the equity of the home.
Virtually all types of loans can exceed equity and income levels. However, when securing a reverse mortgage, loan-holders can never borrow more than their home is worth. For example, if your home is worth $450,000, then your loan cannot exceed $450,000. This is great for both borrowers and lenders, as there is never more debt than can be paid back.
Despite the fact that reverse loans can cost quite a bit at first, they are considerably less expensive as time goes on. In effect, this means the longer the loan is in place, the more financially comfortable you can become. When receiving your loan, you have three options; one lump payment, installments, or a line of credit. If you need special considerations, you can also have a combination of the three.
The economic climate in the United States remains uncertain, for senior citizens and everyone else. A reverse mortgage may be exactly the thing to help you through the tough times. Just be sure to speak with a qualified lender to discuss exactly how reverse mortgage works before entering into any agreement.