Reverse Mortgage – How seniors can ensure a secured financial life

Reverse Mortgage - How seniors can ensure a secured financial life

If you are a senior aged 62 years or above, and you wish to take out a loan which would help you to have a continuous flow of income without making any monthly payments, then reverse mortgage loan is what you need. With the help of reverse home loan, you can get loan advances in monthly payments or lump sum, and the debt will get accumulated till the end of the loan period. Reverse mortgage lets you convert the equity in your home into cash which you can utilize for supporting your daily needs, repairing your home, starting a new business, etc.
5 Requirements for reverse mortgage

To qualify for a reverse mortgage loan, you will have to meet certain requirements. Here are 5 major requirements:

1. You should be aged 62 years or above.
2. The borrower should be the owner of the property to be mortgaged.
3. The property should be your primary residence.
4. You should seek counseling from a HUD approved source.
5. You should pay off existing debts before or right after getting the loan funds.


Types of reverse home loans

There are 4 types of reverse mortgages as given below:

1. HECM - Home Equity Conversion Mortgage (HECM) is the only FHA insured reverse mortgage loan in which you'll get the loan advances even if the lender experiences loss and also in case of any decline in the value of your home during the loan term.

2. Single purpose loan - This type of loan is offered to moderate or low income people by some state and local government agencies and nonprofit organizations. These loans are less expensive and the borrower should mention a specific purpose of taking the loan.

3. Proprietary mortgages- These loans are insured by the companies that offer them and they're quite expensive compared to single-purpose or HECM loans.

4. Un-insured loans- With this type of mortgage, the borrower can get loan advances for a fixed period only and the loan has to be repaid once the advances stop. A fixed rate of interest is charged on this type of loan

There's no doubt that you intend to maintain a good standard of living even when you retire and your monthly income reduces. So, if you do not sell your home and also don't wish to ask your children for money, then reverse mortgage loans can be of great help. You can also take reverse home loans for buying a house. But since your home is a valuable possession, do consult your family and financial advisor before applying for a reverse mortgage loan.