A viatical settlement is the sale of a life insurance policy by the policy owner before the policy matures. Such a sale, at a price discounted from the face amount of the policy but usually in excess of the premiums paid or current cash surrender value, provides the seller an immediate cash settlement. Similar to reverse mortgages, viatical settlements involve insured individuals with a life expectancy of less than five years. In countries with high health care costs (such as the United States), this is a practical way to pay extremely high health insurance premiums and other senior care expenses that severely ill people face. Some people are also familiar with life settlements, which are similar transactions but involve insureds with longer life expectancies (two to fifteen years). - From Wikipedia and other sources 5/2007Advantages And Disadvantages Of A Reverse Mortgage
There are many benefits to obtaining a reverse mortgage. It allows you to get the money you need to live on, pay medical expenses, or what ever need you happen to have. You don?t have to qualify your need or your credit to obtain a reverse mortgage. They are easy to obtain and fast to close. It?s no wonder they are so popular for a lot of older folks.
However there are a few disadvantages which are worth taking a look at.
Heirs are left with a mortgage to pay off.
When you permanently leave your home because you move or die, the home will have to be sold to pay off the mortgage. The mortgage will be due in a lump sum. This leaves the task of selling your home to pay off the mortgage to your heirs. If they decide to keep the home, it is possible if they begin payments on the mortgage within one year of it coming due.
A reverse mortgage has hefty fees.
The fees for a reverse mortgage are more costly than the fees for a traditional mortgage. An additional 2 percent is added for insurance and another 2 percent is added to the origination fees. Closing costs are added as well so a $200,000 reverse mortgage could potentially have $10,000 worth of fees added to it and they must be paid first before the funds are dispersed.
Existing mortgage must be paid of with dispersed funds.
If a standard mortgage exists on the home when you obtain your reverse mortgage, you will need to pay off in full with your reverse mortgage funds or your personal funds.
A reverse mortgage can be ideal under the proper circumstances. It is important to discuss the loan particulars with several lenders to compare terms and to also discuss the situation with your heirs so everyone is aware of what is going on.
Geoff Spencer is a staff writer at http://www.finance-journal.com and is an occasional contributor to several other websites, including http://www.onlinebusinessgazette.com.