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Flexibility & Financial Security: Reverse Mortgages Aren’t Too Good to Be True

The simple flexibility of a reverse mortgage often prompts would-be borrowers to think: ‘this is too good to be true.’ After all, homeowners don’t have to make a monthly mortgage payment; or if they choose to, they can pay whatever amount they wish. But it’s not a free giveaway. Remember, mortgage lenders make their money from the interest that they charge on a loan. With a reverse mortgage, owners are still being charged the interest; they just don’t have to pay it back each month. Borrowers are still responsible for paying property taxes, insurance, HOA dues, and maintenance. A reverse mortgage is quite possibly the most flexible loan ever designed, and that flexibility can provide seniors sixty-two and over the extra financial security they need when it comes to extending their nest eggs.

How Borrowers Can Leverage Their Home Equity

Twenty-five years ago, an estimated 30 percent of American households wouldn’t be able to sustain their current standard of living once they reached retirement. Today, according to a report by the Center for Retirement Research at Boston College, that number is now a staggering 52 percent. With a reverse mortgage, seniors can maintain their financial independence by tapping into their home equity to help make ends meet. With a reverse mortgage, seniors aren’t necessarily limited by their income level or net worth. Funds can be used to cover medical expenses, necessary home remodeling and repairs to improve homeowner safety and mobility, home electrical and plumbing systems, and much more. A reverse mortgage can offer seniors peace of mind, and allow them to stay in their own homes longer.

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More on Reverse Mortgage Payments

Though most homeowners choose not to make monthly mortgage payments, the loan does have to be paid back. The homeowner can pay it back whenever they want, or when they sell the property, move from the property, or the homeowner passes away. Just as with a traditional mortgage loan, the lender will put a lien on the property, but the homeowner retains ownership. If the borrower passes, the home can be sold to satisfy the lien, and the borrower’s heirs keep the remaining equity. A reverse mortgage is a non-recourse loan, which means the borrower or heirs retain the equity. If there is no equity in the house, or the loan balance is larger than what the home is worth, the borrower or his or her heirs are never responsible for the difference; the homeowner can never owe more than the value of the home or the loan balance, whichever is less.

Flexibility and financial stability go hand-in-hand during the golden years, and a reverse mortgage may be just the right solution. There are some requirements to qualify other than being 62. To learn more about reverse mortgages and the risks and benefits, contact one of our reputable certified mortgage lenders in your area.

Learn more about how people are using home equity conversion mortgages for purchasing homes:

Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.