Debt Relief Options From A Reverse Mortgage For Seniors–Calculating The Costs For A Reverse Home Loan

Lately it has been reported that there are seniors who are turning to reverse mortgage options as a way to find debt relief or simply increase their income to a point where their finances will be less strained with various expenses or they will be in a more comfortable position and their later years. While there are some banks that have recently shut down their reverse mortgage departments, with Wells Fargo and Bank of America both leaving this particular business here in 2011, there are still options for seniors when it comes to acquiring a reverse mortgage, but for those who can qualify for this particular type of home loan, some officials and financial watchdogs worry that borrowers are not fully understanding or calculating the costs.

Almost anyone who has ever heard of a reverse mortgage understands the basics of what this particular type of home loan entails, as a seniors can borrow against the equity in their home, and for those who have more equity than they owe on their home, they can erase the remaining mortgage debts and keep additional funds or for those who own their home outright, the amount they borrow from this reverse mortgage is theirs to keep. Also, a reverse mortgage does not require repayment of this particular type of debt as long as the borrower meets certain conditions and remains in their home. This has led to, in some cases, homeowners never having to repay their debt, but simply having their heirs sell the home or refinance after they have passed away to repay this obligation.

Some of the costs that senior homeowners are overlooking though, usually center around the fact that they all were creating debt in their life which, if these conditions of a reverse mortgage are not met, will require repayment. Since a reverse mortgage does not have repayments, the debt will continue to grow thanks to interest and time, so there are these aspects of the reverse mortgage that seniors must also watch out for. Yet, other aspects of reverse mortgage debt also will usually center around the expense related to insurance homeowners must pay. While there are some insurance premiums that are a one time payment, many reverse mortgages also require that some insurance charges being levied each year, which will usually simply increase the overall debt that is required of the borrower, and does not necessitate that a homeowner make these payments each year.

It’s these costs that homeowners and their family members need to take into account before using this particular type of reverse mortgage, and speaking with counselors can are beneficial in terms of how a reverse mortgage may regularly affect a consumer’s personal finances. Obviously, if a homeowner moves or can no longer claim their home as their principal residence, many reverse mortgage contracts will require that repayment of this debt begin, and when interest and insurance payments are all added up, this can be quite costly to anyone. It’s understandable that some consumers have heard positive results in the reverse mortgage market by homeowners who have been able to use this particular type of home loan to their financial advantage, but since this topic is one which is still highly debated, advisers are simply asking that homeowners make sure they understand the entirety of this debt obligation before moving forward.