Advantages and Alternatives to Reverse Mortgages
With a variety of income options to senior adults, reverse mortgages offer one additional option upon attainment of age 62. With the reverse mortgage options, the opportunity to receive a lump sum of cash, regularly monthly cash advances, a credit line or any combination of these is avaialable without any credit or income consideration made. Because re-payment terms are limited to sale of the home, death or change of permanent residence, the reverse mortgage offers ease of mind to the senior adult while maintaining independent living in the home they own.
The disadvantage to a reverse mortgage is what is considered the “rising debt, falling equity”. Although the reserve mortgage program lends its affinity to senior adults through the conversion of equity to cash option, when doing this, your equity will decrease while debt increases. As each cash withdrawal is made against the equity, the relationship continues to become inversely greater. There are, however, a few exceptions to this “rising debt, falling equity” concept such as a substantial property value increase within a short period of time or possibly the elimination of interest. It is important to note, however, that these are very rare exceptions.
As an alternative to a reverse mortgage, senior adults should consider other income options such as utilizing your home as a rental property and/or consideration to alternative adult living facilities. Should these options not be made as consideration, the reverse mortgage may be the next feasible option to boost income level.
A variety of brokerage firms and organizations are available to assist senior adults with information regarding reverse mortgages as well as assistance with application processes. In 1997, the NRMLA was established to provide such assistance. Located in Washington, D.C, the NRMLA provides a team of lenders and investors who work to educate the public in the advantages of reverse mortgages. Working as an advocate for the senior adult, the NRMLA promotes reverse mortgage programs within the lender industry and to ensure age discrimination is not a factor in the program processes.
To obtain more information regarding reverse mortgages and additional income as a senior adult, contact the NRMLA at www.nrmla.org or the aarp at www.aarp.org.
