The Basics of Reverse Mortgages

Posted by Nick Niesen on October 29th, 2010

Reverse mortgages are loans against your home that require no repayment for as long as you live there. As opposed to regular mortgage loans, reverse mortgages have no income requirements and are based solely on the equity of your home or condo. There are no monthly payments to make as the mortgage is due only when the borrower is no longer living at the residence.

Seniors over the age of 62 are eligible for reverse mortgages in the US, provided they own their own single family dwelling. No health requirements need to be met, nor is there any loss of government benefits such Social Security and Medicare as a result of obtaining a reverse mortgage. Some benefits, however, such as Supplemental Security Income (SSI) and Medicaid can be reduced under specific circumstances. Tax liability for monies received through a reverse mortgage are a non-issue, as loan advancements are not taxed, although interest on the loan is consequently not tax deductible.

There are no income requirements to qualify for a reverse mortgage. You may be eligible for a reverse mortgage even if you still owe money on an existing mortgage. The reverse mortgage loan must be large enough reverse mortgage to pay off the existing loan entirely, however.

The benefits of a reverse mortgage are many, and include increased cash flow at a time when many are on a fixed income, putting the equity of your home to use and the ability to choose the method by which you are paid. Several installment options exist to help seniors structure their advances to fit their budgetary concerns and cash flow needs, affording them the ability to effectively plan for their immediate and long term financial future.

Many seniors may feel that borrowing against their home, especially later in life, is a risky endeavor. Reverse mortgages hold little if any risk for the borrower, however, as seniors are not borrowing against future income. Since keeping up with monthly payments is not an issue with a reverse mortgage, the reality is that many who choose this type of mortgage are able to enjoy what they have worked all their lives for in their post retirement years.