Reverse Mortgage A Popular Loan For Senior Citizens

What Can A Reverse Mortgage Mean To You?

Unlike an ordinary Mortgage, a reverse mortgage is completely opposite. This arrangement involves a loan that can be paid to them in a lump sum, as a stream of monthly payments or even as an available line of Credit to be tapped when needed. No loan payments are required while the reverse mortgage is outstanding. The loan is repaid when you cease to occupy the home as your Principal residence, when you sell the home or when you die. This is a strategy sometimes used by retired homeowners who need to supplement their income. A reverse mortgage is one way of tapping into the Equity-loan">home's equity without selling the home.

Reverse mortgages are expected to explode in the coming years. According to the National Reverse Mortgage Loan Association (NRMLA), nearly 38,000 reverse mortgages were originated in 2004, up from just over 18,000 in 2003. They're expected to grow a whopping 58% this year to more than 60,000 originations.

What's suddenly driving the expected surge in reverse mortgages in coming years? Top on the list is our aging society. With the first wave of baby boomers turning 60 this year, look for reverse mortgages to become a viable option to those who are cash-poor, but house-rich in the coming years. Having the option to stay in your own home while converting the unused equity into a new monthly income stream, can be appealing to retirees.

In addition, those who live very long lives can find themselves in the position of having exhausted their financial resources (and sometimes health insurance) but having paid off their house. Combine this with the runaway growth in home values in many parts of the nation and you have a situation ripe for tapping unused but needed home equity. Most retirees have lived in the same house for many years and do not want to leave the comforts of that home, their local friends, favorite vendors, etc. And staying in your own home saves on the double Closing costs of buying and selling a home, as well as the dilemma of having to replace a home in an inflated real estate market.

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