For the past few years there have been many advertisements talking about reverse mortgages, and how they can help seniors live a more financially stable life. This sounds great, and can be an excellent option for seniors who have a home that has been completely paid off; however it is important to understand exactly what a reverse mortgage is and what the draw-backs are for the homeowner. Basically a reverse mortgage allows individuals 62 year old and older to withdrawal some of the equity from their home to create an extra income. The money can be used for almost any purpose from supplementing an individual's social security to paying for unexpected expenses or even making repairs.  There are many other advantages to having a reversed mortgage.

This type of loan is very different from a more traditional mortgage, because there is no monthly payment as long as the home that the reversed mortgage is on is an individual's primary residence.  Hearing this, an individual may think that this sounds like the loan for them; well this actually may be the best solution if they qualify.  Just like most traditional loans there is a qualification process, however it is not as involved as one might imagine.  The major qualification for this type of loan is a person needs to be 62 years old or older, and they have to have their home completely paid off, or a very low remaining balance that the proceeds from the reverse mortgage will cover.  It is also important to note that the applicants for this type of mortgage will be required to acquire consumer information from an approved counselor. Your lending institution will be able to provide a list of approved councilors.

These loans are unique in the fact that they are not based on your income to debt ratio, and there are no monthly payments as long as the home the mortgage is on, is considered an individual's primary residence. The amount a person can borrow is based on an individual's age, the current interest rate available, what the home appraises for, and the mortgage limits for the local area. While this loan does pay the borrower, they are still required to pay all real estate taxes, homeowner's insurance, and other normal monthly expenses such as the utilities. The best incentive about this type of loan is that there is absolutely no threat of foreclosure due to non-payment of the loan, because there are no loan payments.

While all of this may sound wonderful, figuring out how much you can borrow can be estimated by a good mortgage calculator. For this type of loan a free online reverse mortgage calculator will give anyone a very close estimation of the amount they can expect. As with any new loan research is the key to finding the best lending institution for an individual. This type of loan does need to be research carefully due to inheritance issues, and things of this nature, but overall it may be the best solution for a senior who needs a little more income for unexpected incidentals. Armed with good research and the results of a reliable mortgage calculator the process should be a smooth and satisfying one for all parties, and allow our seniors to breathe a little easier.

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Before getting a mortgage on your first home, check out how a mortgage calculator can help you determine your borrowing needs.