subject: How A Reverse Mortgage Operates More Like A Traditional Mortgage Than You Think [print this page] Unlike a traditional mortgage, the reverse mortgage is restricted to those who are aged 62 or older and using the home as their primary residence. All legal owners of the home have to be on the mortgage papers before the reverse mortgage can be processed. Any existing, traditional mortgages on the home have to be paid off or the balance must be low enough to be paid off by the pay-out amount of the reverse mortgage. There are several versions of the reverse mortgage so it becomes very important to review and assess all of them for benefits to your own personal situation.
There are plenty of similarities to the reverse mortgage, however, including the ability to get monthly payments which are generated by the equity that is built up in your home. As you pay down the mortgage of your home, you build up equity in the process. By the time that your home is either paid off or close to it, the equity is as high as it is likely to be. For some people, this coincides with the time that they discontinue working or have a serious reduction in work hours. It is also the time in their lives when they start needing additional money that they no longer are bringing in for health care costs, home repairs, renovations or other unexpected costs.
The reverse mortgage then can be used to provide money in the retirement period keeping the person from having to return to work it from having to eat into their retirement savings.
There are options for the payout of the reverse mortgage, including having a large lump sum, monthly payments, a credit line or a combination of any of these. How you get the money dispersed to you from the reverse mortgage will depend on what you need the money forif it is simply for day-to-day living expenses, it would be better to opt for a monthly payment. However, if it is for a big-ticket item such as medical bills or to pay off an existing mortgage, then it might be better to use one of the other options.
Before applying for a reverse mortgage, it is important that you understand what happens if you move away from the home for any reason or if you pass away. It is also important to know that the reverse mortgage may not be the best option for all people and it is not a free money program for seniors.
It is not money that does not have to be paid back nor does it absolve the homeowner of the responsibilities of property taxes and insurance payments. Failure to pay these items as directed can result in the loan being declared in default and being called due immediately.
