Financial Planning is a reverse mortgage right for me?

If you are over 62 years of age and looking to release equity from your property a reverse mortgage is something worth investigating.  A reverse mortgage is a loan for seniors that free up the equity in a property and converts it to cash.   Once the equity has been freed.  The loan becomes repayable at the point the occupant moves out of the property or dies.

On the surface, this can look a rather aggressive and morbid form of lending.  As with all financial products, there are two golden rules to follow.  The first being, every financial product created has received negative stories in the mainstream media.  Secondly, financial solutions are not designed to fit all people.  Careful consideration should be taken to establish if a solution is right for you.

There are few basic rules that must be adhered to if you are planning to take out a reverse a mortgage.

• You must live in the property you will be placing the reverse mortgage against
• You must be over 62 years of age
• You must have significant equity in the home (approximately 40% or over)
• You must use the equity to generated to pay off your mortgage

If you can complete this checklist, then further research should be undertaken before you make any decisions.    There are a number of good and reputable services that will provide reverse mortgage information.  As with all financial decisions it is important to get impartial advice and up to the minute information.

If you meet certain criteria a reverse mortgage is a very good idea.  A reputable lender will issue a mortgage that is insured by the Federal Housing Administration (FHA).  The loan will allow you to convert the equity held in your home to cash.  With no monthly repayments, this is due to the loan being repaid when the lender passes away or moves from their home.

On the surface, this is a very good idea for seniors.  As part of the criteria for qualifying for a reverse mortgage involves paying off the existing mortgage with the equity created.  Seniors can find themselves with no monthly repayment and equity in hand.

As the loan against the available equity is not paid back until the lender is diseased or moves from their property.  It opens up many possibilities for seniors who own their home.

A recent report shows 10% of seniors being in a default or foreclosure with a very serious risk of losing their home.  Many factors can be at play here.  Our earning potential decreases substantially as we enter our senior years.  Health matters can dominate our lives.  But one constant remain.  The need to hold on to and maintain our home.

When we reach our senior years most homeowners will find over 50% of their net worth sitting idle in homeowner equity.  Freeing up this equity, to settle the remaining mortgage value.  While converting the remaining equity to cash is a very interesting prospect.