Reverse mortgages what do they mean?

Reverse mortgages or lifetime mortgages, what do they mean? Are you retired, or close to retirement? Would you like to increase your income, travel, live in a little more style? On paper you might be worth a little bit, with that nice home of yours; with it all being paid for and that. If only you could free some of the cash tied up to your home without losing your home.

That my friend is what reversed mortgages are for. Admittedly the story above is best possible scenario. Other potential borrowers that would be interested in reversed mortgages are penniless pensioners with no family to take care of them. Taking on a reverse mortgage could be the difference of a half decent retirement and living in poverty.

So what are reverse mortgages?

Reverse mortgages or lifetime mortgages are a financial product open to senior citizens, only for those over 62 years old. This financial product frees the equity in a home which is given to the owner in one lump sum or multiple payments. The moneys given to the borrower are accumulated with no interest or capital payments until the borrower dies and the house is simply when the house is sold by the borrower. This product, reverse mortgages or life long mortgages have many advantages for senior citizens.

1) No tax is paid on moneys taken on as a loan

2) This “income” can be used towards payment for a lifestyle or emergency costs like medical care.

There are no payments or responsibilities to take care of until the borrower dies. Even if the house when sold does not cover the amount borrowed, no payment shall be made by the family of the borrower, the insurance will cover the difference.

In the case of reversed mortgages or life time mortgages the older is certainly the better. The older the borrower, the larger amount he will be allowed to take. The borrower has three main options when taking on his reverse mortgage or life time mortgage. He can receive a line of credit, lump sum or monthly payments. Receiving a line of credit has the lowest rate of interest. The borrower just takes what is needed when it is needed up to the maximum set by the line of credit. However lump sums incur in a higher rate of interest. Monthly payments also have good interest rates with the added benefit that the borrower receives the monthly installments regardless of how long he lives. This option is excellent for borrowers that are not good on budgeting, want to improve their quality of life without losing their beloved home.

Once the reversed mortgages are set there is no restriction on how the monies are to be used. If you are over 62 years old and income is going to be a problem in your retirement and you don’t want to lose your home. Look closer into reverse mortgages with your personal finance advisor.