Senior reverse mortgage – A new way to receive loans even after retirement

Senior reverse mortgage is a way provided for senior citizens above the age of 60 years to receive loans as a regular income stream from any of the lending agencies against their mortgaged house. These agencies could be a bank or any other financial institution. All the payment and receipt of the loans are done as per the policies of the Federal Housing Administration (FHA).

The way it works for seniors
Senior reverse mortgage works on the simple principle of calculating the monetary value of the pledged house by the bank or financial body for analyzing the demand for the same property. This is done on the basis of the market prices of the property and the house conditions. The bank further disburses the loan amount in the periodic form to the borrowers, taking in consideration the interest, costs associated, and the price changes in the form of reverse EMI for particular loan tenure. With each payment made the interest on the house decreases gradually, irrespective of the payment cycle of quarterly, half yearly, or yearly.

Guidelines to be kept in mind
Following points need to be kept in mind before making a senior reverse mortgage.

  • Maximum loan tends to be up to 60% of the residential property’s value
  • Maximum of 15 years and minimum of 10 years is allowed for the reverse mortgage for seniors, except a few banks offering 20 years
  • Flexibility of quarterly, monthly, annual, or lump sum payment is given
  • 5-yearly property revaluation is undertaken by the lender

How does it benefit?
Senior reverse mortgage benefits in following ways.

  • Flexible disbursement options
  • Borrower as the homeowner is free to stay in his home without paying monthly mortgage payments
  • Heirs are not held directly liable in case of payoff balance exceeding the home value
  • Heirs can inherit the residual home equity after reverse mortgage loan payments
  • Heirs can inherit the residual home equity after reverse mortgage loan payments
  • Tax-free
  • Lower interest rates

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