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Reverse mortgages

Reverse mortgages are loans that are offered against the home mainly for senior citizens. They are called reverse mortgages because the equity held in the home by the person goes down over a period of time and the loan with interest increases. In regular mortgages, it is the opposite. As monthly payments are made, the loan amount decreases and the equity increases. For seniors, paying back the loan amount is difficult. The entire loan amount and the interest in reverse mortgages becomes payable when the home is sold or when the person moves or when the person dies.

Reverse mortgages are suitable for older senior citizens and for those with limited income. When the senior citizens die, the heirs become responsible for paying off the loan plus the interest. The heirs can choose to sell the home to pay off the loan with interest against reverse mortgages and get the balance for their own use.

For tax advantages on reverse mortgages it is wise to discuss with certified accountants. Though the monthly payment received on reverse mortgages may not be taxable, the person may stand to lose some government assistance.