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In these times of financial insecurity, many of us are struggling to make ends meet, none more so than the elderly. However, reverse mortgages for seniors are an option to relieve monetary stress should it start to become overwhelming for them.

While they may not be the answer for all, they can be the ideal solution for many who are facing monetary difficulties.

A reverse mortgage can be explained most simply as a type of home equity loan for which no repayment is necessary until the homeowner dies, sells the property, or no longer uses the property as a permanent residence.

Since the decision by the bank or finance company is not based on the homeowners income, these reverse mortgages are fairly easy to obtain for the more elderly members of our society, particularly so because they have most of their money tied up in their property, which is what these types of mortgages are leveraged on.

There are stipulations for eligibility, including:

- The age of the homeowner must be over 62

- The house must be either paid in full or with just a small balance left on the mortgage

- Insurance and taxes must continued to be paid by the homeowner

- Attendance at a mandatory counseling session is required to ensure full understanding of the mortgage process

What happens with a reverse mortgage is pretty simple to understand. A loan is obtained based on the equity in the home, with disbursements available in three different forms. The amounts of the loans will vary, depending on the value of the home and the equity therein.

This loan can be had in a single lump payment or as a series of monthly payments; it is up to the homeowner to decide which they prefer. Homeowners are free to spend the loan on whatever they see fit to, with paying bills, making home improvements and going on trips being just a few of the options available.

As part of the reverse mortgages for seniors system, no repayments may ever need to be made by the senior citizen. That is to say, no repayment for as long as the homeowner makes the home their primary residence and is still alive. Repayments need only be made in the case of the following occuring…

- Death of the homeowner

- Sale of the house by the homeowner

- The homeowner permanently leaves the property; i.e., taking up residence in a nursing home, with a family member or hospice facility

In many cases, a reverse mortgage is a benefit for its recipients. When looking at the benefits though, still bear in mind the fact that a large closing fee may be due on the signing of the mortgage papers. This fee is typically larger than that of a traditional mortgage and it can vary significantly from place to place..

Reverse mortgages for seniors are not a decision to be taken lightly and, as with all financial decisions, all paperwork should be closely examined before making a commitment. Don’t let the paperwork put you off though as professional assistance and counseling is available.

As you or a member of your family reaches retirement you’ll want to read more about reverse mortgages pros and cons. You can also read more about reverse mortgages for seniors here.