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Free up More Cash Flow with Reverse Mortgages

Updated on January 10, 2012

How to Get Cash with Reverse Mortgages

There are 78 million baby boomers that have driven up housing demand and prices for three decades since they started to buy homes in 1970 and are continuing up the housing ladder. There are a number of senior citizens, whom live with a sparse supply of money. When these boomers are met with an unplanned increase in their monthly expenses, they can get into financial trouble. Most of them have equity in their houses and this is the situation, where reverse mortgages can help.

The concept of the reverse mortgage is to organize more disposable cash for seniors and boomers who own a home, where they have equity left. This situation is called cash poor, equity rich. The home equity is generally the only source of extra income they have and using them can compliment retirement planning

When their income level has depreciated, and their expenditures remain the same or worse increase, many seniors have real financial difficulties. Most seniors have worked the majority of their lives and many want to enjoy and live the fullest.

Refinance Home Loan

What are Reverse Mortgages

The Reverse Mortgage uses what the conventional mortgage loans have saved.

The simplest way to view the situation is that with the conventional mortgage a boomer has saved money for some use in the future. Now when he or she has retired and are met with unexpected costs, it gives reason to take these funds and put them use. This is typically achieved by taking a reverse mortgage.

A retiree will decide how the lender will pay them.

You should consider the purpose of the money. This will dictate how the payment schedule should be arranged. Since it is up to the mortgage holder to tell the lender how to pay to them they can choose various options. The alternatives are the lump sum, the monthly payments, the credit line or the combination of these all. You should select how to be reimbursed based on your financial needs

Consider the Home Equity Loan Rates

The interest rates play a major role both in the conventional mortgage and in the reverse mortgage, because they are both long term financial products. The options are the fixed or variable rates. If home price increased during the majority of the mortgage this can compensate a portion of the interest rate cost.

Evaluate Local Home Prices

If local home prices have increased this will bring some additional equity to the mortgage loans. A boomer who has refinance mortgage or taken a 2nd mortgage will remain the owner of the properties but may have severe debt or an abundance or equity. When you look at the statistics of the home price development during the last years, we see, that the price decreased. This comes from the ratio between the supply and the demand. This is of course detrimental and needs to be considered in any retirement planning

You will never owe more than the equity of the home.

The reverse mortgage loan is constantly taken against the equity of your home, which will is the only guarantee. As well a borrower has to take the required mortgage insurance, which is used in all cases, when the selling price does not cover all the loan costs. Also keep in mind about any life insurance costs.

The Dangers of not Knowing About Reverse Mortgages

How are Senior Reverse Mortgages Different from Home Loans

A conventional home loan and a senior reverse mortgage are both mortgages, but are used at different stages of life. What they have in common is that they both have weight on the equity of your home.

The senior reverse mortgages get their value from the conventional mortgage period. The conventional mortgage contributes the equity to the home every time, when the back payment occurs, be it monthly, bi-weekly of even weekly. View it is a kind of the savings program, where a borrower will buy his or her home piece by piece.


The Back Payment.

The entire reason why the senior reverse mortgages are on the market is so, that they can release money to a senior from the equity of the home. The senior reverse mortgages are loans, which are consistently taken against the equity of the homes.

Since the goal is to add the amount of the disposable cash of the senior, there are no monthly back payments. With the conventional home loan the borrower will pay back every month, in contrast with the senior reverse mortgages the loan capital and all the costs will be paid back, when the loan will be closed. This occurs, when the last borrower will sell the house, move away or pass away. Then the house will be put on the market and sold there by the costs will be repaid from the selling price of the house.

Home Ownership.

There is a lot of fear in the market. One of the misconceptions can be from the fact that the lender can take the ownership of the home. This is not true. The borrower will stay as an owner during the whole duration of the loan. Of course the owner has the duties too. They have to pay the insurances and the property taxes and to keep the property in a good shape.

The Lenders will cooperate.

These two mortgage types go hand in hand. The reverse loan will not work, if a boomer has not paid the normal mortgage loan payments and saved the capital into the home equity. So when the savings have happened, when there was more disposable income, it is very natural that a retiree would like to use this money to pay for the increased expenses which typically are medical bills, for example.

Reverse Mortgage Defined

With the number of senior citizens, whom are living with a sparse supply of money and are met with an unplanned increases. They can get into financial trouble. Most of them can rely on the equity in their houses and this is the situation by way of a reverse mortgage. The concept of the reverse mortgage is to manage more disposable cash for seniors and boomers who own their house, where they have equity left

The retiree does not have to tell their income level, credit score or health situation, because this is only a guarantee if there is the equity left in the home.Being informed will help tremendously. Many retirees want to enjoy and live the fullest and a reverse mortgage can help give them the much needed disposable income to do so!

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    • nifty@50 profile image

      nifty@50 

      8 years ago

      Great hub! Thanks for sharing!

    • profile image

      HomeBuyerHelp 

      8 years ago

      Well said. Informative hub page!

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