Reverse mortgage loans have increasingly become more popular among senior citizens. While many see it as a good mortgage program that benefits seniors in their old age, some others disagree saying that it robs seniors of their most valuable possession. The question thus arises, what really are reverse mortgages? Here is a brief overview on reverse mortgages, what it is including its benefits and disadvantages.

A reverse mortgage loan is a special form of loan designed for senior citizens who have reached at least 62 years of age. The loan offers a choice to seniors who are usually retired at this age to turn their homes equity into cash. This affords many seniors an opportunity to access funds and take care of themselves.

To qualify for reverse mortgage, an applicant would first have to be at least 62 years of age, own, and reside in his or her own home. They should have completely paid off their home mortgage or at least paid off a significant portion of it. A unique feature of reverse mortgages is that it does not have to be repaid by the borrower. The lender remains unpaid unless the borrower leaves the home, dies or sells the home. If the borrower dies before using up the home value, the home is then sold to pay off the lender and the balance accrues to the heir.

Some Disadvantages of Reverse Mortgages

One of the main arguments by those against reverse mortgages is that the loan uses up the equity of the home, which is usually the most valuable possession of the seniors. If the senior loses or spends the money frivolously, he or she is left in a worse financial state. The initial costs required to access the loan is relatively high and the loan does not favor those who do not wish to spend the next five years in their homes.

Some Advantages of Reverse Mortgages

Most retired seniors have a problem accessing loans or funds. Reverse mortgages gives them an option to take advantage of the equity they have built over the years. Their credit score does not matter and seniors can access funds to meet their needs, maintain the home and not have to move out of their homes.