The Reverse Mortgage Boosts Senior Citizen Income
Doug Smith

Defined Tag: Reverse Mortgage.

The reverse mortgage is a rarely utilized financial tactic for senior citizens to increase their retirement income. If the person is not working at all, the only sources of income are likely to be Social Security and the senior's retirement accounts. Depending on the political and economical climates, those accounts may vary in value. That is why the elderly homeowner should consider converting the home equity into income.

Reversing one's mortgage sounds like some kind of financial magic trick. It is not. It is a proven tactic for supplementing one's retirement money. To benefit from a reversed mortgage, the person must be at least 62 years old and own most or their entire home. The original mortgage loan is said to be reversed because the owner will be selling their home to the bank. The bank will pay the owner monthly mortgage payments. Meanwhile, the homeowner can continue to live in the house while the bank slowly buys it. This is a loan, not a real transfer of property.

This backward home sale is also called a home reversion in the U.S. In the U.K., it is called a lifetime mortgage or an equity release. The related U.S. trade association is the National Reverse Mortgage Lenders Association or NRMLA. The Association's goal is to educate consumers and lenders about the pros and cons of reversing one's mortgage.

Haven't you ever wished that you could have kept all those mortgage payments you paid when you bought your house? Now senior citizens can do so. The bank buys the house, reversing the roles of the lender and the buyer. Depending on the term of the reversed loan, the monthly income can be hundreds or even thousands of dollars. At the end of the term of the reversed loan, or upon the death of the homeowner, the house is sold to pay back the mortgage payments loaned by the bank.

Some lenders will reverse your home's mortgage in such a way that you can receive the full purchase price immediately as a lump sum. You won't be homeless, however, because you can continue living in the house as long as you want. If you move or die, then the house is sold to pay back the mortgage loan payments paid by the bank to the homeowner.

If you think your retirement income, including Social Security and other government benefits, will not be enough for you to live on, consider taking a reverse mortgage on your home and let the bank pay you for a change.

Copyright 2008 by Doug Smith. All Rights Reserved Worldwide. Unauthorized Duplication Prohibited.