Reverse Mortgages: Another Option for Seniors Facing Financial Difficulties

June 23rd, 2010

Lending guideline changes have restricted the ability of many seniors to access home equity to help pay for current financial needs. As a result, many seniors who before may have used a conventional cash-out refinance, Home Equity Loan or HELOC are now turning to reverse mortgages. Using a simple mortgage payment calculator can show a senior, or children of elderly parents, that perhaps the ability to make a monthly mortgage payment is not feasible.

So how does one pay for increased senior living expenses, extended home care, or even home repairs, without depleting retirement accounts–especially while on a fixed income?

Consider a Reverse Mortgage

Only three factors matter when determining the maximum mortgage amount for a reverse mortgage:

Credit scores do not matter, delinquent mortgage payments do not matter, and maxed out credit cards do not matter. As part of the reverse mortgage, any such debts can be paid off if you so choose; however, if there is a mortgage on the property, it must be paid off upon reverse mortgage funding.

No Income Required

Since there are no monthly mortgage payments on a reverse mortgage, there is no income qualifying–which can simplify the loan qualification process substantially. For example, current underwriting guidelines for traditional mortgages and home equity loans have made qualifying for self-employed borrowers a lot more difficult. As well, the income-to-debt ratio, which addresses borrower debt levels and is a primary consideration for conventional mortgage qualification, is simply not relevant.

With a reverse mortgage, only the age of the youngest borrower and the value of the property are used to determine the maximum loan amount. Thus, if you or your parents are on fixed income from retirement, still working with low income, or self-employed with difficult-to-document income, you need not worry about reverse mortgage income qualifications.

Uses For Reverse Mortgages

There is no need for a free mortgage payment calculator with a reverse mortgage, because there is no monthly mortgage payment to compare. With a reverse mortgage, you will not have to make a monthly payment–so any interest is accumulated and paid off with the principal balance when the loan is paid off upon the future death of the borrowers.

Reverse mortgages offer multiple flexible options for accessing the equity in your home:

The flexibility of mortgage options offers seniors the option to pay for in-home care or assisted living care for themselves or a spouse, regardless of certain financial difficulties. If recent events have created large medical or other bills and caused missed mortgage payments, a combination of a fixed sum to payoff the existing mortgage plus an equity line to have funds available for the future may be beneficial.

Home Purchase

Many seniors are looking to downsize their existing home into something smaller: Many should consider a reverse mortgage for the purchase of their new home.

For instance, even if you feel comfortable taking on a new mortgage payment, you may not qualify based upon your income. Besides, you may not want to spend all the equity in your existing home to purchase your new home, or take on the sizable payments for a conventional mortgage as demonstrated when using a free mortgage loan rate calculator. Protect liquid assets for future needs and monthly cash flow by eliminating your mortgage payments, and simplify your life by eliminating mortgage-related income and credit maintenance needs.

Mortgage rates are at all time lows, for reverse mortgages as well as for conventional refinances and purchases. If you, or your family members, are 62 years of age or older, a reverse mortgage may help to access home equity or purchase a new home in the golden years, without the financial strains which can accompany a conventional mortgage loan.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

Prequalification calculator tips and tricks

March 02nd, 2011

Are you paid weekly or every other week? Is semi-monthly the same as bi-weekly? One of the most important duties performed by a...  Read More

Home price and sales data show weaker housing markets

February 28th, 2011

If you've been thinking 2011 is the year for you to purchase a new home you may be weighing whether to purchase before rates climb...  Read More

Trust yourself, trust your home

February 22nd, 2011

Every newspaper has a section where, if you are in it, you will not be able to read your name and the story. It is the obituary section. Reading...  Read More

Mortgage rates remain above 5 percent as consumer prices rise

February 18th, 2011

There is a relationship between prices you pay in the store and the rate on your new home loan or refinance mortgage. This week two key indexes on prices were...  Read More

0 Responses to "Reverse Mortgages: Another Option for Seniors Facing Financial Difficulties"

No Comments

Leave a Comment