Available to persons age 62 and over, a home equity conversion mortgage, better known as a reverse mortgage, can accomplish a number of things for seniors. Particularly in these troubled times, many seniors find themselves with significant home equity, but limited income and diminishing retirement resources. Tapping into that home equity, without incurring another monthly mortgage payment, is a feature available to seniors.
It is possible to encumber a property with a reverse mortgage, which is one that does not have to be paid back until the property is sold or until the last remaining borrower passes on. There are no restrictions on how the reverse mortgage proceeds are used and the proceeds may be taken in either a lump sum, or in monthly checks to increase monthly income.
It may immediately seem as though a home equity conversion mortgage is a wonderful opportunity, and for many it is. However, there are many pros and cons which much be considered as this type of home equity conversion is really not appropriate for all people.
The most obvious benefits of a reverse mortgage are the freeing up of cash for any purpose, and/or the creation of additional monthly income if that is the primary need.
The most obvious disadvantage of a home equity conversion mortgage is the diminished value of the estate which will ultimately be left to heirs. The second obvious disadvantage is the possibility of greater need for the home equity funds at a future date. And, thirdly, these can be very expensive loans to obtain.
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