Reverse Mortgages - Funding Retirement
With people living longer and longer, funding retirement can
become a stressful situation. Reverse mortgages can help home
owners avoid worries about cash flow.
Reverse Mortgages
Reverse mortgages are essentially a method for turning the
equity in your home into cash. Although there are various
options, a typical reverse mortgage will provide you with a lump
sum, monthly payments or a credit line based on the equity in
your home. The mortgage will have a term of a certain number of
years. Instead of making payments on the loan, the bank will
become the owner of the percentage of your equity applied for
the loan at the end of the term.
Reverse mortgages are only available to older applicants. Every
person listed on the deed of the home must be 62 years of age or
older. You must also use the home as your primary residence.
The decision to pursue a reverse mortgage can be a tricky one.
The biggest issue is an emotional one. We are all mentally
trained to buy a home and try to build equity over the years.
With a reverse mortgage, we are making the mental leap to
actually reduce the equity in our homes. While this may sound
like a sensible method for using the nest egg equity, it makes
you, me and everyone very nervous.
For some seniors, the reverse mortgage decision makes sense
while it doesn't for others. To limit the potential for problems
and scams, banks are required to have senior applicants meet
with unbiased third parties to determine the benefits and
downside of using reverse mortgages.
If you or your parents have reached retirement age and are
facing cash flow problems, you need to become flexible in
dealing with finances. Reverse mortgages may be one flexible
option that makes sense for your particular situation. After
all, you can't take the equity in a home with you.