At some point everyone has seen those commercials on television. A wise senior citizen going into detail how they are enjoying their retirement. They boast about seeing their grandchildren who are across the country. They are overjoyed to talk about the Mediterranean cruise they take every year and they even claim to have a more fruitful social life than ever before. This whole time you are waiting for it. When will this person tell me how I can enjoy my retirement like they can? Not a moments notice later the secret has been revealed. " I could not do any of this without a reverse mortgage".It is a very interesting concept and is very effective for the individuals who utilize it. A program developed to help individuals with a lower set income see some extra cash flow every month. The only catch is the effectiveness of such a mortgage can be positive or catastrophic. In this article we will discuss what a reverse mortgage is, who uses them and the pros and cons attached t o all elements of such a program.The concept of a reverse mortgage is to give new life to your "dead money". To be put simply a reverse mortgage is when a borrower options to take the equity out of their home as opposed to putting it in. To be put even more simply it is when the bank pays you every month as opposed to you paying them.As previously mentioned this program is designed to help supplement income for individuals who have equity in their home but are having a hard time with the month to month bills. Looking at the purpose of the mortgage it is safe to say that the elderly are prime candidates. Beyond the costs of living such as groceries,taxes,utilities and insurance the elderly generally have high medical bills. These extra costs are difficult to manage and some months their pension cheque cannot finance their expenses.The GoodAs specialized as a reverse mortgage is,it has its place. In the example above we talked about a senior citizen who did not have enough inc ome every month to live comfortably. As a result, bills are paid late,groceries are scarce and sadly some months prescriptions can't be filled. A reverse mortgage can help this senior take care of themselves and live a comfortable retirement. This case is the cookie cutter example of a person who should be using this program to improve their quality of life.The BadEveryone has a greedy streak in them. Some more greedy than others but as a whole we always seem to want more. Shamefully this attribute does not go away with age and this is when a family can get into a world of trouble without even knowing it. Seniors still get bored and envious. If their friend bought a new car it's only instinct to attempt keeping up with them. Sitting at home watching Matlock reruns does not seem to please anymore. The older generation wants to get out there and do things so they can show they are the youngest old person in their circle of friends! That's great! But how are you going to pay fo r it? This is where "the bad" comes in. Seniors who want the active lifestyle but can't pay for it will go the reverse mortgage route even though they were living comfortably before. As time passes,receiving payment after payment,vacation on top of vacation, age finally catches up and tragedy strikes. This is where the bad ends and the ugly begins.The UglyTaking out a reverse mortgage is a decision that will affect the borrowers loved ones sooner or later. Unfortunately the senior citizen in my example above did not inform their family of the choice they made and now they will be left with a financial situation that they may not be equipped to deal with. Upon death of the borrower the lender will request payment on the loan immediately. Majority of the time the family does not have the funds to pay the bank and therefore they must sell the house. The next few weeks the family will devote their time,effort,emotions and money trying to get the house in shape so that it will se ll for what they need to pay the lender back. In most cases the sale of the house will more then cover the outstanding mortgage and leave some inheritance for the family. However in some cases the house does not sell,or it does not sell for what is needed to repay the loan. At this point the bank will come after the borrowers loved ones for the outstanding balance.As you can see the reverse mortgage is a very specialized product and with good reason. It is meant to give people a good quality of life and should not be taken advantage of for anything more then that. Something as simple as having a family talk about reverse mortgages can really ease the burden down the road. Keeping the family informed and up to date on important decisions will give everyone's heart and conscious the peace of mind it deserves.
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