According to Eastern philosophy, when God makes a problem, he or she also makes a way to solve it. In some ways, modern financial thinking is the same. There are many things that can go wrong with money, but luckily there are ways to fix them.
For example, you could become weak and overextend your credit so much that it can't be fixed. When this happens, filing for bankruptcy can be a way out. Even though it wasn't pretty, it was a way out. Then again, you might need to spend more money than you have for a short time. Possible solutions include lines of credit, credit cards, personal loans, and payday loans.
I found a very interesting option when I was looking into these choices. Who could help older people who have built a home over their lives but now need money for daily or special expenses? Even if you don't believe in eastern philosophy, there seems to be a solution. You could also think about getting a reverse mortgage.
In this type of mortgage, the borrower does not have to pay back the loan. Could that really be the case? Yes and no. Seniors can borrow a lump sum or a steady stream of money against the value of their homes if they have built up equity. In contrast to regular mortgages, they don't have to make payments on a regular basis. This is because the borrower has to pay back the money when certain things happen.
Some of these situations are: if the old borrower decides to sell the property. Most of the time, the person who took out the reverse mortgage would be the first person to get the money, or the second person if the first mortgage was still being paid. The old person who borrowed the money dying is another common thing. In this case as well, the lender takes the property back and sells it.
The only other thing that could happen is that the borrower stops living in the home. This might be because she or he moves into a senior living facility or something similar.
The important thing to remember is that a reverse mortgage can help a retiree who would otherwise not have enough cash to get cash and peace of mind. This peace of mind comes from not having to worry about making regular payments.
As with any other type of financial arrangement, the reverse mortgage is also subject to rules and laws. In many places, an issuer must be at least a certain age to make this kind of deal. In some other places, there is a rule that lets a borrower take out this kind of loan more than once, as long as the equity or value of the underlying property is going up.
Even though this way of getting money is easy to understand, the math that goes into figuring out how much you can borrow is anything but simple. The overall interest rates in the economy are one of the things that are taken into account. The value that has been added to the property. The asset's market value. How old the person is. How the money is paid for: a lump sum or a line of credit. And there are still a lot more.
