The truth behind a reverse mortgage

 As the baby boomers start to age, we may see our friends and family start to choose a reverse mortgage.  The percentage of older people who will have to work after the age of 65 continues to grow.  So how can people supplement their retirement years?  You can with a reverse mortgage loan, but it is extremely important that you understand what you are getting yourself into.  In order to get one of these mortgages, you have own your own home and remain the owner going forward.  Reverse mortgage information is getting easier to get either online or from your banker or mortgage broker. 

Here are the key facts on a reverse mortgage and how they work. You have equity built up in your home and you can borrow that equity and pay interest on it.  The advantage is that you get a monthly payment coming to you versus you making one to the bank.  You no longer have to worry about having to work in your golden years because of the financial freedom reverse mortgage can provide both you and your family.

But what is a disadvantage of a reverse mortgage?  First, you have to remain the owner of the home and you must continue to pay the property taxes, home insurance and maintain the property.  When the loan is done or you pass on, you or your estate must repay the loan including interest.  This is often done by selling the home or property and repaying the bank.  Lenders are not interested in taking possession of your home, they would much rather be paid.  The size of reverse mortgages will vary from company to company but a general rule of thumb is the older you are the higher the loan can be and the more your home is worth, the larger the loan value.

Like a traditional mortgage, you have an option to pay back a reverse mortgage at any time.  They are however come due immediately if the last surviving borrower passes away, sells the property or moves from the home.  On the other hand, the lender can call the mortgage if you don�t pay your property taxes, don�t insure it or you don�t keep it well looked after and repaired.  If you have signed mortgage documents and for some reason change your mind, you have 3 business days to cancel the loan.  You must cancel it in writing not over the phone or in person.  These mortgages are complicated so it is best to get good legal advice before proceeding with one.

As the population in North American continues to age, reverse mortgages will continue to gain popularity.  With rising costs, most people's nest egg is the home.  Why not use it then to generate guaranteed monthly income to take care of extra costs such as vacations.  Most banks and mortgage brokers have complete details on a reverse home mortgage or loan.  It this sounds interesting to you, make an appointment with your banker to discuss the details.  Another recommendation is to review all documents with your lawyer just as you would when getting a conventional mortgage.

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