Mortgage Article

  • Reverse mortgages are growing in popularity for more than one reason. An obvious one is that senior citizens on fixed incomes can supplement that revenue by exchanging home equity for cash monthly. Beyond that, a good many retired people would rather stay in their homes than sell the property and downsize. Either way you expend your equity, with a reverse mortgage, usually month by month, by selling, all at once. So, the question facing seasoned residents who own their homes free and clear, for the most part, is: can they meet their expenses using the value of the property?

    For retirees, even when income is fixed, expenditures can fluctuate. Inflation affects prices, health will affect personal needs and the natural deterioration from age and the elements requires ongoing maintenance for the property. A tenure reverse mortgage gives owners the resources to steadily put funds away while meeting everyday needs. In this way, home equity is not simply a number on a balance sheet, but instead a tangible way to buy things and manage money. To the less-informed, reverse mortgages look like a way to victimize senior citizens, leaving them penniless and homeless. This is not the case.

    In fact, those who opt for a more "conservative" route to staying at home often employ a cash-out refinance. For many of these well-intentioned homeowners, that cash pay-out they get at closing exhausts itself faster than they anticipated. Soon enough, they are looking at a debt that they cannot afford to pay. Foreclosure follows. Yet this nightmare is unknown with reverse mortgages. Even if the equity borrowed is disbursed in a lump sum, payment is not due until you move out of the house or, well, pass away. Speaking of which, applicants must be at least 62 years old. Underwriters will often evaluate the application with an assumption that people die at 100.

    So, is the reverse mortgage right for everyone? It works for many because it allows them to stay at home and pass the property onto heirs. It helps many more with cash flow and quality of life. Also, disbursements are non-taxable income. Yet it may not be the best financial vehicle for those who plan to sell the house sooner rather than later and are seeking an infusion of cash for immediate purposes. These borrowers may do better with an alternative financial product. Speaking to a mortgage specialist can help to clarify the choice.

    When considering a reverse mortgage, experience and knowledge should guide you. Reach out to Craig Daniger at Power Play Mortgage for a full explanation of how reverse mortgages can benefit your financial future.
    Craig Daniger - Loan Officer
    Phone: 818-326-1915