As the cost of living rises in 2010, a larger number of older homeowners are looking for a financial solution that allows them to remain in their home and still have available money at their disposal. Often, an older homeowner’s basic living expenses will exceed the income he or she receives after retirement, such as social security benefits. The cost of healthcare, often a necessity for older Americans, is also rising and is not always completely covered by health insurance or government aid. A reverse mortgage could be the answer to this financial quandary.

Reverse Mortgages for Seniors: Basic Information

This type of financing is specifically designed for older homeowners who are financing a residential property. This loan is unique, compared to other conventional home loans, because it does not require the homeowner to make any monthly mortgage payments. As long as the homeowner pays property taxes, stays current on homeowner’s insurance and maintains any necessary home repairs or maintenance, he or she will not have to make any payments on the loan for as long as he or she remains living in the home.

If a homeowner has sufficient equity in his or her home, that equity can be converted into cash with this type of loan. The money received from the loan is tax-free and can be used any way the homeowner sees fit. The money can be used to pay off other existing debt, healthcare costs or to simply improve one’s current lifestyle. The amount of money a homeowner can receive depends on his or her age, the value of the home, and current interest rates. Homeowners can choose from several disbursement options, including a lump sum, a line of credit, monthly payments or a customized option that is designed to meet their financial needs.

Requirements of this Loan

There are certain requirements a homeowner must meet to fulfill the terms of the loan. All homeowners listed on the title of the home must be at least 62 years old. The home being financed must also be the homeowner’s primary residence, which means he or she resides there at least six months out of the year. Due to the absence of monthly payments, there are no income or credit requirements for this type of loan, so in many cases, it is quite easy to qualify for this type of financing.

An appraisal will need to be done on the home to ascertain the home’s value. This will tell the homeowner how much equity is in his or her home so that the lender can determine how much money he or she can receive from the loan. The homeowner must also attend reverse mortgage counseling before he or she can take out a reverse mortgage. This counseling covers the loan and all of its requirements so that homeowners are better prepared before deciding on this type of financing. In many cases, free counseling is available to borrowers.

Benefits of this Type of Financing

This type of loan is insured by the Federal Housing Administration, which in turn guarantees that older homeowners who take out these loans and stay current on taxes, insurance and repairs will never owe more than the value of their homes once their loans are due to be repaid. This type of financing allows a homeowner to stay in his or her home without worrying about paying monthly mortgage payments. This will leave him or her with more money for other expenses and will help them maintain or improve their standard of living.

Senior homeowners have many expenses they are responsible for and the income they receive after retirement may just not be enough. A reverse mortgage could be the solution to their financial needs.

Victoria Belle-Miller is the newest member of the Senior Reverse Mortgage writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the team and a valuable source of sound mortgage advice.

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