To explain whether a ‘reverse mortgage’ is a good decision one first has to explain what a ‘reverse mortgage’ is. Well in a phrase, it is a source of funds available from banks or financial entities to any person who is 65 or over and any person who owns their property outright.
They may have been paying a mortgage on their home during their earlier years in life and have now finished paying all the installments or maybe they never even needed a mortgage as they had sufficient funds of their own to be able to pay for their home outright, but which ever the case, they must own a property which is in their name and which is debt free.
So a ‘reverse mortgage’ is exactly what its name implies. As opposed to you paying a mortgage (paying back the loan that the bank gave you in order to buy your property), as you already own the property, instead it is the bank who gives you some money each month as if it were the bank that was slowly buying your property off you. Which in effect is how it works. The bank of course will get richer by acquiring a whole load of properties from old people who need the extra money and who don’t have any relative to whom to leave the property.
Your property will be valued by the bank, usually at 80% of the market value, and it is on this 80% that they will pay you, for the rest of your life, a monthly sum.
For example, if the bank determined that 80% of the value of your property was € 500,000 well then you would get approximately € 600 each month and every month until the day you died.
After that date, the property would ultimately belong to the bank, unless of course it had been agreed that your children or relatives, if you had them, wanted to remain with the property, in which case they would have to pay back to the bank all the money that you had received from it.
A ‘reverse mortgage’ is a sensible and very good decision for any person that has no savings, no relatives and really can’t survive on their ever diminishing pension because to be able to receive some extra funds each month is a real help and makes ones property end up working for you
So at the end of the day a ‘reverse mortgage’ is really a very good decision for people over 65 years old who are hard up for cash and who have no relatives to worry about leaving anything to. They can just enjoy receiving their monthly sums and when they die what do they care if the bank takes over their property when all they are concerned about is living their last days on earth with less financial worries!