Reverse Mortgage - Putting Your Equity to Work
If you're like many seniors, your home is your largest asset,
and although you are concerned about the thought of borrowing
against it, your house may be the only way to increase your
income. Rising real-estate prices have caused many seniors'
homes to significantly increase in value. But unless they are
willing to sell, it may be an inaccessible gain during a time in
their lives when extra income and liquid assets would be very
helpful.
Many seniors don't qualify for home-equity loans based on
income, and in any case, those home-equity loans require a
monthly repayment, so they don't solve the cash-flow problems.
There is a way to put this equity to work - Reverse
Mortgages.
Reverse mortgages have been around for years, but it wasn't
until the early '90s that they began earning respectability
after the Federal Housing Administration started regulating and
insuring the program. Reverse mortgages are starting to catch
on. In the last three years the number of new reverse mortgages,
nationwide, has tripled.
How a reverse mortgage works
Reverse mortgages allow you to withdraw money from your home
equity, tax-free, with no requirement that it be repaid until
you die or move out of your home. You can use the money for any
purpose. And, as long as the you live in the home, pay the
property taxes and homeowners insurance, there no way you can be
forced out of your home. The loan might be in the form of a line
of credit that can increase over time and be drawn as needed, a
lump sum payout, a fixed monthly check for as long as you live
in the home, or a mix of options.
Typically there are no out of pocket expenses, as closing costs
and other fees can be wrapped into the loan. The reverse
mortgage also pays off any existing mortgage, ending that
monthly bite on income. The amount you can receive through a
reverse mortgage depends on your age, location of the home,
interest rates and value of your home. The actual amount is
easily calculated and will not vary from one lender to another.
How Do I Know If a Reverse Mortgage Is Right For Me?
A Reverse Mortgage might be worth considering if: