Reverse Mortgage Loan
Disadvantage or Advantage For Senior Citizen Homeowners?

A Reverse mortgage loan can be an invaluable benefit for many senior citizen homeowners, but may also be a disadvantage to others. With a regular mortgage, the lender makes a lump sum payment to the borrower, who in turn repays it through monthly payments to the mortgage lender. With a reverse mortgage, the mortgage loan home lender makes a monthly payment to the homeowner who later repays in a lump sum. The reverse mortgage can be particularly valuable for a senior citizen homeowner who does not want to sell, but whose retirement income is not quite enough for comfortable living. The homeowner receives a monthly check, has full use of the property, and is not required to repay until he sells or dies. If he sells his home, money from the sale is taken to repay the loan. If he/she dies first, their property is sold through the state and the loan repaid. 

Benefits of a Reverse Mortgage

• Able to borrow against the equity in the home
• No payments due on the mortgage for the entire time that the homeowner lives in the home
• Provides source of tax free income for the homeowner
• No minimum income requirements to qualify 

Reverse Mortgage Loan Disadvantage

Many heirs of senior citizen homeowner whom take part in the reverse mortgage loan; generally do not like the idea, since it cuts into their inheritance amount, since the equity in the home is being borrowed against and is no longer an asset. Also many seniors do not like the fact that the homes that they worked for their entire lives and own free and clear will now have a large debt against it, even though the debt will be paid off from the proceeds.

A commonly overlooked disadvantage is that government aid programs that senior citizen homeowner qualify for when they meet certain income and cash asset criteria may be in jeopardy. If a senior citizen is participating in one or more of these programs, they need to make sure that their benefits will not be affected by the income that would be generated by taking out a reverse mortgage.

Reverse Mortgage Loan to Home Loan