Reverse Mortgages for Senior Citizens

As inflation once again rears its ugly head in today's global economy, many seniors on fixed incomes are starting to face the difficult reality that their incomes are not keeping up with today's prices. Seniors who are receiving fixed income payments to pay for basic living goods are facing drastic increase in the costs of food, medicines, and utility bills. However, there is a source of income that many of them may not realize they can draw from that will not cost them a penny of their current income - their home equity.

If a senior citizen is over the age of 62 years old, they may qualify for a reverse mortgage. In a reverse mortgage transaction, a mortgage company makes either a lump-sum payment to the homeowner, or a series of monthly payments to the homeowner based on the current equity in the property. They also have the ability to draw the money from an equity account as needed. The money that is given is not paid back to the mortgage company until either the owner moves, and the property is sold, or the homeowner passes away. If they pass away, the property is sold and any remaining money is passed on the owner's estate. The heirs can also either payoff the mortgage, or sell the property and keep any remaining equity.

The risk of these loans are small, if non-existent, to the senior homeowner. Not only will they be able to take advantage of the equity in their home, but they are not required to pay the money back out of their current income. Also, if the amount of money they receive is higher than the payoff value of the home when it is eventually sold, the lender will take the loss. The lender is willing to take this risk because they know that they will receive their money back in the long-term, and they do not have to worry about having expenses they would if they were doing a traditional loan, such as foreclosure expenses if the loans not paid on time.

In some cases, the only parties that may object to a reverse mortgage are the heirs to the homeowner. In this case, they are facing the possibility that the amount they will inherit will be reduced based on a reduction in home equity. However, if the heirs of the homeowner are not willing, or unable to help them with current expenses, then a senior citizen has every right to use all their resources in order to supplement their other retirement income.

Ultimately, if prices continue to rise, and senior homeowners are not able to pay for the costs of basic goods, a reverse mortgage may be one of the major ways that seniors are able to utilize the main source of American wealth - real estate.