Many homeowners are now looking to buy a home with a reverse mortgage. Tremendous growth in the housing market over the last few years has given many homeowners a considerable boast in equity.
Take for instance, Doris and Robert who purchased their home 45 years ago for about $15,000. Now in their mid-seventies the couple is pleased to discover that area home values have skyrocketed and single family homes like theirs are currently selling for a minimum of $150,000.
Doris and Robert like many other homeowners who originally purchased their home for a modest price and have maintained the same residence for a number of years are now retiring and finding reverse mortgage value in their home equity.
Seeking a change, many of these homeowners are looking to buy a home with a reverse mortgage. They are now thinking that the equity they have built up could be used to finance a second home in the country or a waterfront cottage.
While only a very small percent of mortgages are actually the reverse type, reverse mortgages are gaining in popularity.
Federally insured since the late 1980’s, the reverse mortgage allows mortgage-free homeowners to borrow against their equity.
Traditionally, homeowners only saw the disadvantages of a reverse mortgage and regarded them as a last ditch effort to avoid foreclosure, pay medical expenses in later years or to keep their home in good repair. Today’s senior homeowners however are turning to a reverse mortgage as a creative way to enhance their retirement years.
A reverse mortgage now provides retiring couples with an opportunity to enjoy the fruits of their labor. They have raised their families, paid off their mortgage during their working years and are now looking to enjoy a few luxuries. Further, couples who never had an opportunity to travel can now do so by dipping into their home equity.
When you buy a home with a reverse mortgage you are able to pay cash for the second ‘vacation’ home while continuing to live in your primary residence for as long as you wish or are able. Once you die, your primary residence is usually sold to pay back your reverse mortgage loan, while the second home becomes part of your estate.
In order to buy a home with a reverse mortgage you also must be age 62 or older. As a reverse mortgage borrower, you can opt to receive a lump sum, a line of credit, or regular monthly payments.
While this may seem like a win-win situation for the senior homeowner, the borrower must beware. It’s important to proceed with caution when dealing with what is quite possibly your single largest asset.
Only after careful consideration should you buy a home with a reverse mortgage. Reverse mortgages are not for everyone and borrowing against your equity can quickly turn into a negative if you don’t fully understand the advantages and disadvantages of a reverse mortgage.
One of the major disadvantages of a reverse mortgage is that you would not have the funds available should you or your spouse, require long-term home or hospital care and all your money is tied up in a reverse mortgage.
Despite the potential drawbacks, such mortgages programs are allowing today’s seniors the opportunity to buy a home with a reverse mortgage and enjoy the retirement they always dreamed of.
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