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Reverse Mortgages - Can Your House Really Pay You?

Reverse Mortgages ? Let Your House Pay You! By Don Seibert

That?s right ? once you turn 62 years of age, you become eligible for a reverse mortgage. This relatively new mortgage vehicle can provide you with income from the equity in your home. In fact, if you owe less than 20% to 40% of the value of your home, you can use a reverse mortgage to pay off your existing loan and provide yourself with a monthly income ? all at the same time.

Know your options!

Whether or not you intend to get a reserve mortgage at this time, you at least need to understand how reverse mortgages work so that, if needed, you will know about our home equity ?ace in the hole?. Let?s say that you are going merrily though retirement without many cares and with your financial life pretty much in balance when a serious illness, hospital bill, or other catastrophe confronts you. Understanding the equity in your home and how a reverse mortgage works, you?ll have the security of knowing how to handle the crisis situation, should it occur.

As you have paid on your home mortgage for years, you have reduced your debt and increased your equity in the property. Now, with a reverse mortgage in place, your equity is decreased and your debt increased. You never have to repay the debt as long as you live in the house. The mortgage balance only must be repaid when you move or pass away. If the home and mortgage are in joint names, your surviving spouse can continue to own the home and to live there after your death. In fact, if you live to be 110 and outlive the equity in your home, the shortfall is covered by reverse mortgage insurance provided by our Federal government. If and when you should decide to sell your home, the outstanding mortgage balance must be repaid.

Improve Your Family?s Cash Flow

When you get a reverse mortgage, you will have several options available to you, You can take your equity as a lump sum, payoff any outstanding mortgage balance, and invest or spend the remaining funds or take a monthly amount for the remainder of your life. Such an option has a very beneficial effect on your monthly cash flow. Just imagine, your mortgage payment obligation is replaced by a monthly check. That?s what we call a Double Whammy on your budget!

Since reverse mortgages (sometimes called a conversion mortgage) first became available a few years ago, they have become one of the most popular forms of mortgages available. Many experts attribute this to the increase in the cost of living, particularly medical costs, over the past decade. As the costs have increased, the fixed incomes of many retirees have proven inadequate to make ends meet and the reverse mortgage provides the net cash flow difference needed by so many seniors.

Plan on living in the home for a while?

Since there are significant fees and closing costs related to originating a reverse mortgage, it should only be considered if you plan on staying in the home for at least five years or so. Otherwise, refinancing to a reverse mortgage may not be financially justifiable.

How to get started

There are many options, details, fees and other considerations related to obtaining a reverse mortgage, so it can be somewhat confusing. Therefore, you should not rush into it and you should obtain the advice of your trusted family attorney and/or accountant. There have been scams out there, so beware! Make certain that your lender or broker provides you with trade references and be sure to check them out with the Better Business Bureau.

Investigate reverse mortgages and learn more about your options. It will increase your feeling of security immensely!

Don Seibert is a retired business executive intimately familiar with real estate mortgages and the needs of senior citizens. His website is www.retiree-finance.com and it has More Reverse Mortgage Information and many more free articles related to home refinance for Senior Citizens.

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