It’s Called a Reverse Mortgage Because it Gets Larger, Not Smaller, Over Time

By R W Taylor

When senior citizens consider borrowing on home equity as part of their retirement financial planning they have options. In addition to more typical home equity loans or home equity credit lines, reverse mortgages are available as loans for seniors. But, the difference is, the typical mortgages are paid down monthly so that the seniors home equity begins to grow again.

With a reverse mortgage, once taken against the equity in the home, no payments need be made during the lifetime of the homeowner’s, and the balance on the mortgage grows as interest is added to the balance each month. In essence, seniors can turn their home equity into cash by taking either a lump sump, by taking monthly checks to enhance their income, or by establishing a credit line from which cash may be drawn as needed or desired. But, in each case, the balance of the mortgage will grow monthly, diminishing the equity in the home.

To be eligible for this type of loan the youngest homeowner must be at least 62 years of age, and of course the home must be owned by the borrowers. It is not necessary that the home be owned free and clear, as an existing balance can be incorporated into the new ‘reverse’ mortgage, but there must be sufficient equity for a new original balance to be well below the current value of the home.

Borrowing on home equity in this manner, to generate immediate cash or to create credit lines for the elderly is possible through a reverse mortgage, but many factors must be considered because, as noted at the top, a reverse mortgage balance grows over time, it does not get smaller over time.

Want more information about Reverse Mortgages?

Find out how to get the best Reverse Mortgage rates.

http://www.prosandconsofreversemortgage.com is a free resource for anyone looking for a Reverse Mortgage or looking to learn more about mortgage loans in general.

Photo by David Baron

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