Most senior citizens who are in urgent need of monetary assistance but do not want to consider selling their homes in order to raise the needed capital are often advised to talk to their lenders so that the equity on their homes can be converted into cash.
This is possible under a scheme known as the Reverse Mortgage. The reverse mortgage allows senior citizens to live in their homes whiles at the same time, allows them to obtain a substantial amount of money from their mortgage lenders.
Senior citizens who are faced with financial difficulties and would want to consider a reverse mortgage as a way of addressing this financial problem are often times confronted with mortgage lenders who are willing to give out the many advantages associated with the program without fully introducing homeowners to the disadvantages.
When one goes deeper into the activities of mortgage lenders who actively put interested seniors on the reverse mortgage scheme, one is likely to find out that the cost of closing a reverse mortgage is very high. This is because as a mortgage loan program, the reverse mortgage is filled with so many fees and charges. This is what makes the reverse mortgage scheme, a profitable venture for all mortgage lenders who participate in it.
Furthermore, let us just take a look at the regulations governing reverse mortgages in the country. Under the rules of the reverse mortgage program, only senior citizens of age 62 years or more can convert the equity on their homes into physical cash that may be used to improve upon the quality of their lives.
More to the point; unlike many other types of mortgage loans where the borrower is the one supposed to pay money to the lender, the reverse mortgage rather requires the lender to pay money to the borrower. However, for as long as the homeowner lives in the property, he or she would not have to repay the lender.
In spite of this regulation, mortgage lenders are still happy to give out reverse mortgages to qualified homeowners. This is perhaps, due to the fact that upfront fees that are charged on the home’s equity are so high that it makes up for a significant proportion of the risk associated with reverse mortgages.
Though the mortgage lender, through the reverse mortgage scheme, has some level of interest in the property; it remains the responsibility of the homeowner to ensure that the home is well maintained. The reverse mortgage may bring the homeowner some level of comfort due to the fact that the person will receive money from the lender but such financial responsibilities such as tax payment and mortgage insurance premiums may contribute to the homeowner’s existing financial problem.
When the reverse mortgage borrower dies or the person decides to sell the property, then the mortgage lender can step in to ensure that the mortgage is paid off. This will include the principal amount, interest and lenders’ fees charged on the home loan. Essentially, the reverse mortgage is that program that leaves debt behind after the borrower has passed away. The home will have to be sold in order to completely pay off the lender. On the other hand, if the home fails to raise enough capital to settle the mortgage, then part of the dead person’s estate will be used to cater for what is left to be paid.
In the opinion of some industry experts, the reverse mortgage should only be used as a last resort instead of making it a program of choice for many senior citizens who are in need of money. According to these experts, mortgage refinance can help a borrower more than reverse mortgage. This is because; comparatively, reverse mortgage has higher interest and closing cost charges and easily affects a borrower’s equity putting the person in danger of becoming an underwater borrower.