Reverse mortgages have been featured a lot in print media and in the internet in the recent past. This is due to the reason that these are special types of loans that usually give retirees and their relatives great financial independence. After retirement, a senior person (elderly) is usually faced by a lot of problems with the main problem being financial difficulties. As such, most of the elderly people end up dependants on their children and other relatives in order to receive financial support. With the current economic times, supporting an elderly person can prove to be quite a task especially due to increased need for medical attention due to great age advancement. However, this situation can be avoided as reverse mortgages have made it easy for the elderly people to achieve financial independence.
What is a reverse mortgage?
A reverse mortgage is a special type of a long term that is only given to the elderly people of 62 years and over. The pros of these loans exceed the cons of the loans and as such, they are a great financial option for the elderly to try out. The only requirement other than age is that the applicant should be a home owner and that he/she should be able to surrender the equity of his/her home in order to cover the loan. However, despite the fact that these loans are very advantageous, it is important that borrowers should receive professional counseling about the implications of the loans to the borrowers. One thing that most borrowers do not know is the fact that after applying for these loans, they are usually tied to the homes. As such, they can not be able to sell the homes or lease the property before completely repaying the loans.
A reserve mortgage is also known as a home equity conversion mortgage and is usually backed by the federal government through insurance. This helps in ensuring that the liability of the borrowers is limited in that if the home equity is not enough to pay back the loan, there is no other property that can be repossessed in order to cover the loans. A reverse mortgage is seen by most financial analysts as an investment option especially because of the reason that it is the borrower who gets paid instead of him/her repaying back the loan.
Advantages of reverse mortgages
The main advantage that comes with reverse mortgages is the fact that it accords a senior person financial independence. As such, the senior person is able to meet his/her personal needs such as medication or better yet pay for private nurse’s services to take care of him/her. This money can also be used for other purposes that may include home repairs and general improvement in order to enhance the senior’s comfort.
Seniors should always ensure that they are aware of the all the advantages and disadvantages of these loans before applying for them. This is important in that it helps in ensuring that there are no implications that are likely to arise in latter stages after applying for the reverse mortgage loan.