| Turn on the television or open up your internet | | | | home by giving it to the homeowner by way of a |
| explorer and chances are you'll see ad after ad | | | | monthly "allowance" or one lump sum. Rather |
| for reverse mortgages, all of which are targeted | | | | than needing to be paid back to the bank every |
| toward senior citizens. With so many scams | | | | month, however, the mortgage do not become |
| these days that revolve around mortgages, and | | | | due until the homeowner dies, sells the home, or |
| those geared toward senior citizens, you do well | | | | leaves the home permanently (such as to move |
| to want to explore all the details of mortgages | | | | to a nursing home or other full-time facility). If |
| before ever signing on for such a deal. So, what | | | | there is no payment arrangement at that time, |
| are they and how do they work? And why are | | | | the bank would then seize the home the way |
| these ads only geared toward seniors? | | | | they would with a typical mortgage foreclosure. |
| First of all, it's important to understand that | | | | The Pros and Cons of Reverse Mortgages |
| reverse mortgages are advertised to seniors not | | | | You might immediately be thinking of some |
| because they are some type of scam but | | | | drawbacks of reverse mortgages. For example, |
| because they are only available to those 62 and | | | | if the homeowner is getting this loan as monthly |
| over in the United States. Sorry, but you must | | | | payments and then he or she dies, chances are |
| be a senior to be eligible. | | | | there will be no cash reserves with which to pay |
| It's also good to understand how a typical | | | | back the loan. This means the bank is likely to |
| mortgage works. For a regular mortgage, the | | | | seize the home. For those who had been looking |
| homeowner borrows a certain amount of money | | | | to leave their home to their children or |
| at a certain interest rate and pays monthly | | | | grandchildren as part of an inheritance, this can be |
| payments to the bank. Because of the way the | | | | a complicated problem. When the home is sold, |
| loan is amortized, much of those payments go | | | | monies owed for the mortgage get paid first; any |
| toward interest, but as the principal of the loan is | | | | and all equity above and beyond that go back to |
| paid down, the homeowner builds equity in the | | | | the estate, but this often takes time and of |
| home. This equity is an important factor in | | | | course there are always added fees and costs |
| mortgages. Equity in a home simply refers to | | | | tacked on when the bank needs to seize a home. |
| the fact that the home is now worth more than | | | | However, reverse mortgages might work for |
| what the homeowner owes on it; if he or she | | | | seniors that need cash for their health care or |
| were to sell the house, that excess amount they | | | | other reasons. If they only take a small amount |
| would receive over and above the loan amount is | | | | and leave other cash reserves, such as their |
| equity. | | | | 401(k), then there may be a cash reserve from |
| In many cases, a person may buy a home when | | | | which to repay any mortgage when they become |
| they are younger and as they pay over the life | | | | due. Or, seniors who do not have children or do |
| of the loan, by the time they are a senior citizen | | | | not plan on leaving the home to the children can |
| the mortgage may be entirely paid off. When | | | | tap into this money while they are still alive and |
| they are in their 60's, it's assumed by many that | | | | may need it. |
| they don't have a mortgage or have very little of | | | | Examining all these details of reverse mortgages |
| the mortgage balance left. The home by this | | | | is the only way to really be sure if such an |
| time should have quite a bit of equity in it. This | | | | arrangement is appropriate for you. |
| type of mortgages tap into that equity of the | | | | |
