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Reverse mortgage: Benefits to senior citizens

Reverse mortgage is a loan that is offered to any person over the age of 62 and owning a home. The advantage of a reverse mortgage for a senior citizen is that he or she can choose not to pay back any amount that is raised as a mortgage loan, as the total amount and interest accrued becomes payable upon the person moving away from the home or selling the home or upon death. If the person dies, then the heirs have the option of repaying the mortgage loan raised using the reverse mortgage and the accrued interest. If not they may choose to sell the home and clear the outstanding loan and interest.

The amount that can be borrowed using a reverse mortgage depends on the equity held at the time of availing the loan. This amount also depends on the interest rate and the age of the person. Instead of receiving a lump sum amount, the person can also choose to receive monthly payments from the loan amount. The interest accrues on a monthly basis and as explained before the total amount on the reverse mortgage becomes payable when the person moves or sells the house or dies.

The payments a person gets on a reverse mortgage may not be taxable; also the person may not qualify for government assistance. It is better to get an advice from an accountant. It makes sense for senior citizens who do not have enough retirement income to go in for a reverse mortgage and get all the benefits before they close their eyes.