Reverse Home Mortgage

A reverse home mortgage is an increasingly popular financial plan for older people who own their homes and need money. Essentially, this plan allows a homeownwer to borrow against the equity in the house. However, unlike traditional financing plans, repayment is not due until the last survivor passes away or moves out of the residence. The way reverse home mortgages benefit the lenders is that when all the owners die, the house can then be sold by the estate and the loan can be repaid.

In order to qualify, no other liens should be placed against the property. Ideally, the homeowner will own the house outright. If a homeowner still owes a balance on a note, however, a reverse home mortgage could still be a possibility. Sometimes these new loans can be used to pay off the first note as well as any other outstanding debts against the house. This will then leave the new note as the only loan against the property. The fees for reverse home mortgages can also be rolled into the new loan so applicants do not need to come up with extra cash to enter into the contract.

Often the elderly find themselves in financial situations due to rising medical costs, excessive home repairs, and loss of income through retirement. More of a hardship can be created if they are then forced to sell their residence to repay debts. Reverse home mortgages offer a solution to these financial problems by allowing the elderly to borrow against the equity they have spent perhaps a lifetime building, without the burden of worrying about repayment. A reverse home mortgage does not allow a person to borrow more than the value of the home. This ensures that the lender will be sufficiently repaid when the house is sold.

How do lenders make money on these services? Interest is charged on reverse home mortgages, but it is rolled into the loan and accumulates over time. When the house is sold, interest is calculated and added to the total amount due from the estate. A reverse home mortgage creates a worry-free way for senior adults to enjoy their retirement without the hassle of asking their children for money or severely adjusting their lifestyles. "The hoary head is a crown of glory, if it be found in the way of righteousness," (Proverbs 16:31).

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