What's Reversed in Reverse Mortgage?

What mortgage is, we all know: mortgage is a financial tool we can use in order to borrow money for real estate purchase. We then mortgage the property as an assurance that we will pay back the money we borrowed.

The "reverse mortgage" tool was designed for people who already own a property, live in it, and doesn't have to pay a mortgage for it. Reverse mortgage is usually aimed to the older layer of the population (age 61 and up), that already own a property (that worth a great deal of money) but are having difficulties in funding their everyday life.

The average age is getting higher every day, as more and more people live longer. In addition, the awareness for high- quality life is rising among the elderly. Before, if our parents and grandparents used to live in a modest lifestyle- nowadays it is more common and popular to enjoy a high quality life at an older age as well. What is the point in accumulate assets throughout our career, many ask, if we don't exploit it to enjoy and have a high quality life in our retirement?

There are other expenses as well- the older population usually has medical needs, and an excellent medical treatment can rise to high sums of money. Taking a different kind of a lawn is problematic, as the older population usually doesn't have a steady job or a monthly salary. Sometimes they don't have a life insurance that can promise the loaner he'll receive his money back.

Before, in order to finance a high quality lifestyle when you're older, or when you're in need of medical care, you had to sale your property, you house for example, and move to a rental residence. These days there's a financial tool, the reverse mortgage, which was created to prevent you from selling the property and move to a rental residence in order to pay for present expenses.

In reverse mortgage you receive a loan from the bank, a loan that you won't pay back until you leave your property, your house, for different reasons. In Israel, the loan height is usually no more then half of what the property is worth. You can receive the lawn in several ways, like one time draft, fixed monthly payments or as required (line of credit). In reverse mortgage there aren't any monthly repayments!

The bank itself doesn't loose from the reverse mortgage, as the repayments are promised via the property and its documents, which includes a warning note in favor of the bank. The monthly payments, as well as the accumulate interest, will be paid back when the property will sale, eventually.

Cases in which both of the partners pass away, after enjoying the lawn money throughout their life, are solved by giving the inherits the right to pay back the lawn as well as the interest in a period of one year from the moment they inherit the property. Inherits can pay back the lawn with their own money or by selling the property which was used to take the lawn. Cases in which inherit can not or will not pay back the lawn, the bank will sale the property in order to repay the lawn. If after selling the property there's some money left- the bank will transfer it back to the inherit.

Reversed mortgage has both supporters and opposes: opposes claim that there are other ways, more economical ways, to pay for present expenses when you're older, like selling your property and move to a rental house in order to enjoy the sale money while still alive. Supporters claim that most of the elderly prefer to continue living in the house they love and got used to, and that the reverse mortgage allows them to do so.

Those of you who find the reverse mortgage attractive should consult an authorized and loyal financial before deciding to take advantage of this financial tool and its benefits.