The Reverse Loan is Becoming a Viable Option for the Elderly

by : Jay Moncliff

The reverse loan has been on the market for sometime now, but only recently is it receiving the attention it deserves.? Today this product in the mortgage industry is becoming very popular. What is a reverse loan?This type of loan is where a bank or financial institution offers a loan on the capital you have in your home. The benefits of this loan are that this loan need not be paid back for as long as you live in your home, or when you decide to sell your home. Today people are living longer lives and so people who have capital in their homes find themselves asset rich but cash poor. What I mean by this, is that they find that their incomes are not enough either to live off of, to pay medical bills or even to pay for in home help, and yet they have paid off their home so they have capital in their home, but they just don’t have the cash they need. Up until this loan option was made available, the only option these people had when faced with a cash shortage was to sell their home and move into smaller lodgings.Today the reverse mortgage lets them access the capital they have in their homes without having to move out. Requirements for the Reverse LoanIn order to qualify for this loan a person has to be 65 years of age and own their property outright. If they don’t own their property then the mortgage should be low enough that it can be paid off at the closing of the reverse mortgage. Most homes qualify for a reverse mortgage, the only type of home that may not qualify is the coop and some manufactured homes. You need to discuss this with your loan officer if you own either one of these two types of homes.Benefits of the Reverse LoanAs mentioned before the reverse mortgage can be used to supplement your income or for medical bills. In fact the reverse loan can be used for anything including going on that world trip you have always wanted. The older you are when you apply for a reverse loan, generally the more money you can qualify for. The amount that is given to you can be paid out in one lump sum, in a monthly payment, and in some cases can be placed as a line of credit. The Disadvantages of a Reverse LoanAlthough there are many advantages to a reverse mortgage, there are also a few disadvantages. First the loan will need to be paid back should you move out or sell your home. Another disadvantage is that you will not leave much for your heirs in as far as the home equity. Should you pass away this loan will need to be paid from the proceeds of the sale of the home.Another disadvantage that is not known until the last minute is that the closing costs of such a loan are somewhat high. There are instances when closing costs can be as high as $10,000 dls.Although a reverse mortgage can be beneficial, it is not a transaction to go into lightly. Both the advantages and disadvantages should be carefully considered to determine if this is actually a procedure you wish to continue with. You should also only deal with a reputable financial or mortgage institution. Be sure that it is a company with a good track record so that you actually get what is being offered to you.