The first reverse mortgages were taken in 1989, twenty years ago, with quite modest success. That is very understandable, because the reverse mortgages are very special loans and because seniors were skeptical.

The more reverse mortgages were sold, the more the information was spread and the more confident the seniors became. This all meant, that today the reverse mortgages are very popular products and will offer great help for the seniors with their daily expenses.

1. The Added Funds Can Be Substantial.

The lenders are not interested about the credit information nor the incomes of the seniors, because the loans are taken against the equities of the homes. So the homes are the guarantees. But how much the seniors can get? It depends on some factors.

Because the home will be the guarantee, the appraised value of the home will influence on the loan sum. Another factor is the age of the lender and the third factor the interest rate level. We can roughly say, that the more expensive the home, the older the borrower and the lower the interest rate, the more the borrower will get. There is a ceiling of $ 625.000.

2. A Senior Can Choose The Payment System.

Funny thing is that with the reverse mortgages the lender will pay to a senior. And a senior can choose, how he wants the lender to pay. The alternatives are as a lump sum, as a credit line, as monthly payments or as a combination of one or all of these.

3. The Costs Are Higher.

A borrower will pay nothing back during the running time of the loan. The capital, the interests and all the costs will be paid back, when the loan will be closed. This happens, when the borrower will sell the home, move away permanently or die. It is wise to check the costs during the counselor meeting.

4. A Senior Will Stay As An Owner.

So in this respect the reverse mortgage is as the usual mortgage. The ownership will not be changed, the question is only about the loan against the home equity. This means also, that the owner will benefit from the home price increases.

5. The Interests Can Be Deducted In The Taxation.

This is one big benefit. A senior can deduct the interests in the taxation after he has paid the interests, i.e. after the home is sold. The terms can fluctuate from state to state, so it is wise to contact the taxation office for details.

Juhani Tontti, B.Sc., Marketing. When the reverse loan is the only reasonable alternative to get the needed money, the pros of the reverse mortgage are heavier than the cons. Visit: reverse mortgages