Reverse mortgages are one of the largest growth areas in the mortgage business. These mortgages offer older people the chance to get cash based on the equity they have in their homes or condos. When the reverse type of mortgages are used, the lender pays the home owner an agreed upon rate. The homeowner does not need to pay the reverse payment back, but can use the money in any way they desire. There are many reasons that these mortgages can be a godsend.
A reverse mortgage pulls out the cash held in equity in a home, giving the homeowner the funds they need. These funds are not paid back, but, at the end of the loan period, which is usually upon death of the homeowner or upon sale of the home, the reverse mortgages become due.
But, why would any one want a reverse mortgage? Why are more and more Americans looking to reverse mortgages? In many cases, these mortgages are great ways to get the cash that they need. They can be used to pay off medical bills. Reverse mortgages can be used to prepare for long term care. Many people secure reverse mortgages simple to enjoy life. They purchase an apartment in a foreign country. They take vacations and see the world. Perhaps they want to buy a vacation home.
When first created, the reverse loans were slow to gain acceptance. Homeowners were reluctant to step into these types of loans. Reverse mortgages, once they gained ground and more people understood them, have become fast growing loans. In 1989, the federal government began backing the reverse mortgage. The National Council on Aging is promoting the reverse mortgage as a terrific way to finance home modifications, medical care, and in-home care to avoid nursing homes. These loans can help homeowners prepare for their golden years, whether that be for living the high life or paying for home remodeling.
There are a few downfalls to reverse mortgages. Reverse mortgages can be taken out on many homes and condos. Oftentimes, this can leave homeowners vulnerable. Beware - there are disreputable people trying to cash in on reverse mortgages and can be found going door to door to sell them. Also, closing costs can top $10,000. It is recommended that anyone considering a reverse mortgage do so only after very careful consideration of their financial needs and the needs of those who stand to inherit the home.
Reverse mortgages are predicted to increase even more in the next several years, especially as retirement income and pensions are constantly threatened.