Many homeowners have benefited using the reverse mortgage. It has helped them to improve the quality of their life during retirement. It is also known as a conversion mortgage and is similar to a standard mortgage where the homeowner does not need to qualify or make monthly payments. For this type of mortgage the interest and the loan are paid off when the property is sold. In the US, this mortgage is administered by the US department of Housing and Urban development. The program is known as Home Equity Conversion Mortgage.

Eligibility

In order to be eligible for the reverse mortgage you have to be at least 62 years old, you need to own a home or have low balance that can be paid off during the procedures, you should stay in the home and you have to receive some information from an approved HECM counselor before getting the loan. There are several advantages of using this loan.

Advantages of Reverse Mortgage

The greatest benefit is improvement in the quality of life. The money which you get from reverse mortgage can be used in any way you like. You do not have to borrow money from others for all your basic requirements. You can be financially independent too. Even after the sale of the home you can still remain in the home, make modifications and be known as the owner too. There is no need to make any monthly payments either till you have decided to sell the home, move or the property is settled. Another benefit is that it is very easy to qualify for the reverse mortgage because you need to be 62 years or above and there is no credit check etc. The money you receive can be used for paying off the closing costs which is usually added to the balance of your loan.

With reverse mortgage you will never owe more than the value of your home even if the lenders have paid you more than the value of your property. The money you get from this is tax free. There are no restrictions on how you should use the funds. You are free to use it in any way you want like traveling, treatment, insurance, education etc. You can receive the amount in the form a credit line, lump sum or annuity. The greatest advantage is that you can remain in the home for as long as you like and retain the ownership too.

Disadvantages of Reverse Mortgage

Just like other kinds of loans there are certain negative aspects of reverse mortgage. The money you borrow will be charged with an interest. Though no 'upfront' fees is required the closing costs is added to the balance of your loan amount. You can qualify for the loan only if you have a primary property. A resort or a second home is not accepted for the loan. Some people have mobile homes and cooperative homes as primary residence. Unfortunately, these do not qualify for the reverse mortgage. The age of the borrower is also very important. The homeowner should be 62 years or above to qualify.

Many people have used this as a source of income during their retirement life and enhanced the quality of life without being a burden on others. If the conditions are ideal you too can opt for a reverse mortgage and increase you spending power during retirement life. Unlike other loans nobody can take away your home if you do not make the payments on time.