Reverse Mortgages, Retire in Style

A reverse mortgage is a secured loan that is available to home owners who are 62 years and older. It enables a home owner to convert a part of their equity of their home into a tax free income. They are not required to fore go the title of their homes or even make regular mortgage payments. The secured loan that is advanced becomes due when the last borrower leaves the home permanently. This loan in fact acts as a great supplement to your current income without leaving you the worry about ever making a repayment.

Current income and advantages of a reverse mortgage

As you are not required to make any repayments on this loan, your current income will have no bearing on the loan you apply for. You will be able to qualify for a reverse mortgage even if you have no income to show for. The only criteria that will apply are that the title of the home be clear with no lien on the property. You are also left with a few advantages in your hands when you take a secured loan in the form of a reverse mortgage. You will have independent and sole use of the property and also retain the ownership f the home. You are not required at any time to make any mortgage payments as long as you continue to occupy the property. Money received from such a loan is not considered as income. Therefore you will not be liable to pay any taxes on the money received. Moreover as it is not considered an income, your Medicare and Social security benefits will not be affected either.

Difference between home equity loans and reverse mortgages

A home equity loan is different from a reverse mortgage. You are given the loan for the purchase of your home and are required to make monthly repayments towards the money advanced. You will also be required to furnish proof of income before the loan is advanced. A reverse mortgage is exactly the opposite. The money is advanced on the equity that you have already built up. The money is either paid to you in installments or in a lump sum as may be decided. The only condition applied is that you continue to occupy the home.

No restrictions on the use of money received

Lenders do not place any restrictions on how the money received can be used. It is left to the discretion of the borrower to use the money in any way they please. They can use it for home improvements, repayment of debts or just to enhance retirement benefits. With costs of living increasing this could be a perfect choice for people who have a home without any mortgages to repay.

What happens if the borrower passes away?

After the last borrower has passed away the legal heirs may choose to retain the property by paying off the loan that had been advanced. If they choose otherwise the lender will dispose the property and any funds remaining in excess of the loan amount and charges will be handed over to the legal heirs. The borrower will have the opportunity to utilize the full value of the secured loan in the form of a reverse mortgage and also use the property on which the money is advanced.