Benefits of a reverse mortgage - Is Now A Good Time To Get A Reverse Mortgage?

D H Lawrence in his classic novel Sons and Lovers observed that a daughter is your daughter the whole of her life while a son is your son till he finds himself a wife. (D H Lawrence).  These words were true and fair then and may even be amended to be, your children are only yours till they are out of your home. 

Most parents invest in the education and general welfare of their children with the aim of not only empowering them, but also to secure their old age.  But we all know the truth about this assumption, especially the latter.  Children will invariably forget their parents.

Legislation to enable and protect senior citizens

Section 201 of the American Homeownership And Economic Opportunity Act of 2000 was couched as for this protection.
“The purpose of this section is to authorize the Secretary to carry out a program of mortgage insurance designed:

1. To meet the special needs of elderly homeowners by reducing the effect of the economic hardship caused by the increasing costs of meeting health, housing, and subsistence needs at a time of reduced income, through the insurance of home equity conversion mortgages to permit the conversion of a portion of accumulated home equity into liquid assets; and
   
   
2. To encourage and increase the involvement of mortgagees and participants in the mortgage markets in the making and servicing of home equity conversion mortgages for elderly homeowners.

For purposes of this section:
The terms “elderly homeowner” and “homeowner” mean any homeowner who is, or whose spouse is, at least 62 years of age or such higher age as the Secretary may prescribe”

Pros And Cons Reverse Mortgage - How will I benefit from a reverse mortgage?

Since reverse mortgages are Government insured and government sponsored, much of the conditions imposed on traditional mortgages do not apply to them.  In fact, they are tax-free funds for as long as you live in the home.

Traditionally, loans advanced may have restrictions and especially so if they are secured by real property. Reverse mortgages have no such restrictions and one may use the funds as they please.

For many borrowing facilities, the lender will expect the borrower to have a consistent source of income, medical checkups and/or credit requirements. This are not required when one seeks to secure a reverse mortgage from the lender.

In the traditional mortgage, loan repayments are the hallmark of the relationship between the mortgagee and the mortgagor.  For reverse mortgages no loan repayments are required for as long as both or one of the spouses live in the home.

“Ownership” of the home will not be transferred to the lender when one borrows under this scheme.  Therefore, for the borrower, he/she may not be subjected to the many legal remedies afforded to the lender, like foreclosure.  However, this is only guaranteed as long as you maintain your home, and pay insurance and real estate taxes.

The borrower is also allowed to choose the mode of releasing cash that best fits him/her.

Social responsibility

The onus of taking care of senior citizens rests on the active generation.  It is therefore proper and advantageous to the wider community if mortgage market participants play a role.

References

1. D H Lawrence – Sons and Lovers
2. American Homeownership Act 2000
3. http://www.wikipedia.com