Senior Reverse Mortgages - 5 Questions Before You Apply

By Juhani Tontti

So the reverse mortgages are always taken against the equity of the homes, i.e. they eat the money, which the home owner has paid during many years from his salary. In a way the money has been in the home value for several years and added value there and now it is used in the form of the reverse mortgage loan.

1. Have You Thought About The Alternatives?

The financial status of a senior will determine, which solution is wise to use. The reverse mortgages are not always the best solutions. For instance, if a senior wants to spend a cruiser holiday, then it is best to ask more payment time from the travel agent.

But if the need is to get more disposable money for the increased medical bills, then the reverse mortgages can be the solutions. It is important to understand, that the reverse mortgages are long term agreements, like the usual mortgages.

2. Have You Enough Information?

Sometimes the senior wants only the cash money and does not think all the many terms of the reverse loan. The loan terms can be very complicated and in some cases even too big things are offered to the senior. So it is very important that a senior will discuss with his relatives and especially with the federal counselor.

3. Do Those People Know About Your Plans, Who Should Know?

These loans are a sort of the hidden loans, because they only bring cash money every month and nothing will be paid until the loan will be closed. But in a reality they eat the home equity, which means that the heirs will get smaller heritages, what they have maybe thought, if a senior has not discussed with them.

4. Do You Know, How Serious Thing This Is?

By serious I mean, that a reverse mortgage loan is a long term agreement and when nothing will be paid away during the running time, all costs will be collected into the loan sum, including the interest rates. This means that the reverse loan is an expensive loan and the running time is many years. This means, that the purpose to which the loan will be used should be a serious one.

5. Do You Know, How Much You Can Get?

I cannot give you a formula, because the terms fluctuate lender by lender and state by state. The general principle is that the amount depends on the age of the borrower, on the appraised value of the home and on the interest rates.

Juhani Tontti, B.Sc., Marketing. The senior reverse mortgage can give useful cash to a senior citizen, but a senior must be aware of the many reverse loan terms and details.

Photo by Sabrina Jackson

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