Debt Consolidation

The folks who are nearing retirement age either have a lot of home equity because of the real estate boom that the country has witnessed or have much heavier debts as compared to earlier generations. This is prompting many people to take reverse mortgages to consolidate their debts.

With a reverse mortgage a person’s credit rating is not taken into consideration unlike under regular mortgages. This is because ultimately the lender’s money is realized from the house and not the borrower. The lender also doesn’t get the title of the house. He merely acquires a lien which ensures that the loan is repaid when the property is sold.

Reverse mortgages are tools that are aimed at senior citizens. This allows homeowners to get cash in return for their home equity while at the same time not having to worry about making monthly payments. Under this system the loan and interest are deferred until the owner dies, sells the house or moves. So the lender can recover the amount from the house but at the same time the owner never owes more than the value of the house. The lender cannot take away the house either as long as one of the borrowers continues to live in the house. It is only once they move out, sell or die that the house can be sold. That means future generations will not be burdened with additional debts. It seems like an ideal option for older people who can live their lives in comfort without worrying about how the will manage the monthly payments.

There are some negatives attached to reverse mortgages however. Getting a reverse mortgage can entail some serious up front costs such as the costs of appraisals, mortgage insurance and the fees charged by the lender.

Reverse mortgages are useful for debt consolidation but the borrower must first be aware of all the terms involved in it.

You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.