Taking A Look At Reverse Mortgage For The Elderly, Learn How You Can Make Money From Home Equity

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If you were to ask the average person what is reverse mortgage, chances are they wouldn't be able to tell you. Many people, especially those not working with mortgages have never ever heard of this concept. This is a great pity because it's one of the best financial planning tools available for seniors and those reaching the age of retirement.

As many individuals reach retirement age, their fixed incomes simply aren't adequate. They aren't receiving enough through social security or a pension fund to take care of the rising costs of living and the medical attention many older citizens must have. Those who fit in this category are now beginning to turn to reverse mortgage to increase their monthly income. Basically, reverse mortgage offers the elder a way to benefit from the equity in their homes by turning that equity into a monthly income.

There are three basic types of reverse mortgages:

1. Single-purpose reverse mortgage
   This type of plan is usually offered by state or local government agencies or nonprofit organizations.
   
2. Federally-insured reverse mortgage (also known as Home Equity Conversion Mortgages – HECM)
   This type of plan is backed by the U.S. Department of Housing and Urban Development (HUD)
   
3. Proprietary reverse mortgage

This type of plan is backed by companies that developed them.

Single-purpose reverse mortgage is usually very low cost but not available everywhere. Also, they can only be used for purposes specified by the government or nonprofit lender to (for example) pay for home repairs. You may only quality for this type of loan if your income is low to medium. The other two plans (HECM and proprietary) are similar to one another and definitely more expensive. However they are widely available and you don't need any income or medical requirements to apply for them.

One of the greatest benefits from a reverse mortgage loan is that it isn't taxable, nor does it affect Social Security or Medical benefits. You also retain the title to your home without having to make monthly repayments. However the loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence

If you're considering a reverse mortgage just be aware that:

• Lenders generally charge origination fees and other closing costs for a reverse mortgage. Lenders also may charge servicing fees during the term of the mortgage. The lender generally sets these fees and costs.
• The amount you owe on a reverse mortgage generally grows over time. Interest is charged on the outstanding balance and added to the amount you owe each month. That means your total debt increases over time as loan funds are advanced to you and interest accrues on the loan.
• Reverse mortgages may have fixed or variable rates. Most have variable rates that are tied to a financial index and will likely change according to market conditions.

Reverse Mortgage