The negative connotation that reverses mortgages formerly had, due in large part to predatory lending practices, seems to be fading away. With more consumer-friendly rules in place and a general uptick in consumer knowledge, reverse mortgages are once again receiving widespread media attention.
The number of seniors who are thinking about getting a reverse mortgage is growing. But what is a reverse mortgage and how does it work, and why exactly are so many individuals getting these types of mortgages?
With a reverse mortgage, the borrower does not have to make monthly payments to the lender; rather, the lender makes the payments to the borrower, thus the name. The loan might be disbursed to the borrower all at once, in installments, or in the form of a revolving credit line. Reverse mortgage borrowers often have the flexibility to do more than one of these things.
As long as the last living borrower of the reverse mortgage is still using the house as their principal residence, the homeowner is not required to repay the loan. Borrowers seeking a reverse mortgage need to be at least 62 years old and have a significant amount of equity built up in their house before they can be considered for one of these loans. Here are some of the most prevalent reasons why a senior homeowner would consider obtaining a reverse mortgage.
Paying Off Debt
With the help of a reverse mortgage, you can access the equity in your house to supplement your monthly income. If you have additional debts that are getting in the way of meeting your basic living needs, you could use the cash to eliminate some of those obligations.
According to data, approximately 1 million Americans aged 65 and older have student loan debt, a quintuple rise in only 15 years. They have the highest percentage of all loan holders that are past due, and their numbers are expanding faster than any other category of borrowers. The funds from a reverse mortgage might help with that.
As A Means Of Covering Health Care Expenses
Medical costs can become more of a burden as we become older. Costly medical care, such as several trips to the doctor or hospital, or extensive treatment, can have a significant impact on your budget. Without having to sell your house or take on additional employment, a reverse mortgage can assist reduce some of those costs.
As A Down Payment For In-Home Care Services Or A Nursing Home
If your health insurance or Medicare does not cover the whole cost of nursing home care or in-home caregivers, those options can also add up to a significant financial burden. A reverse mortgage might be able to give some financial stability while you plan for your own senior care or the care of your spouse.
Making Changes To An Existing Home To Allow For Later Life Independence
People often get a reverse mortgage because they want to stay in their current residence for as much of their remaining life as they possibly can. However, it’s not always possible to achieve this without making some changes.
You could use the proceeds from a reverse mortgage to help pay for house modifications that will allow you to continue living there as you age. A few examples of this would be the addition of grab bars in your bathroom and corridors or the construction of a ramp.
The Desire To Travel
Reverse mortgage money can be used in more interesting ways than just paying off debt or paying the bills. Reverse mortgage borrowers are increasingly using the money to fulfill their bucket lists, which often include activities they never had the time or money to pursue before retirement.
Using the money to travel and have amazing life experiences is not a bad idea, provided that all other financial obligations have been met and it won’t negatively affect you or your loved ones. This is especially true for reverse mortgage proceeds. Alternatively, a reverse mortgage might give you enough funds to enable you to pay more frequent visits to distant relatives, such as grandkids.
To Boost Your Pension Income
Finally, a reverse mortgage may serve as a source of additional retirement income, allowing you to buy more of what you want. Reverse mortgages can be a great way to improve your retirement, whether you simply need a little assistance paying the bills, want to join a gym, or want to take advantage of a local continuing education program.
Final Thoughts
Reverse mortgages can be a big help to the aging population in particular. The money that these borrowers are receiving is often used to help them in various ways. Whatever the reason, it’s clear that there are plenty of benefits associated with getting a reverse mortgage.
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