Is a Reverse Mortgage for Senior Home Owners a Good Idea?

There are many senior home owners in the position where they have a lovely house with no mortgage on it, but very little in the way of cash to live on. This has led to an increase in people looking at the possibility of getting a reverse mortgage.

A reverse mortgage is a special type of loan that is made to homeowners that are 62 years old or over. The lender will give the home owner either a lump sum, line of credit or a monthly income. In return, the loaned amount is repaid when the homeowner dies, moves out of the property, or sells the house. One of the main attractions of the reverse mortgage is that there are no monthly repayments as with a normal mortgage.

For this reason, a reverse mortgage can be a good idea for seniors that are in the position of being "equity rich but cash poor". They are able to stay in their home and use the money for any number of uses. A monthly income could be used to supplement a pension. Alternatively a lump sum could be used to carry out modifications to the house or pay for healthcare.

But it should be remembered that this is not "free money". The amount of equity that is in the house will be reduced when you come to sell it or pass it onto your family. This is something that needs to be discussed and fully understood. It is a good idea to talk this over with your children. There are also housing counseling services that will give you unbiased advice whether this is a good option for you.

There are many benefits that reverse mortgages can offer senior homeowners. But it is essential that you enter into this type of loan knowing all the facts and how it will affect the equity in your home.

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