Is a Reverse Mortgage Right for You?By Debbie Wilson
Loan Page Columnist
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If you're a homeowner and 62 years of age or older, a reverse mortgage just might be what you need to turn the equity in your home into cash. And whether you are seeking money to help pay healthcare expenses, home improvements, or simply to supplement your current retirement income, a reverse mortgage can help. Qualifying for a reverse mortgage is easy, but there are several points to consider before you cash in on your home's equity.
Reverse Mortgage ExplainedReverse mortgages differ in many ways from traditional mortgages. First, in a traditional mortgage, you make monthly payments to your lender. In a reverse mortgage, you actually receive money from your lender. This money is not required to be paid back for as long as you live in your home as your principle residence. Instead, the loan is repaid when you die or sell your home.
How Do I Receive My Cash?In a reverse mortgage, there are several ways to cash in on your home's equity. You might need cash all at once in the form of a single lump sum. Or, maybe you'd rather receive regular monthly payments. You can even get a "credit line" account and pull the money as needed. In any case, depending upon the type of reverse mortgage you obtain, you can control your money flow to best suit your cash needs.
Types of Reverse MortgagesThere are basically three major types of reverse mortgages: single-purpose reverse mortgages, offered by some states, government agencies, and nonprofit organizations; federally-insured reverse mortgages (Home Equity Conversion Mortgages); and proprietary reverse mortgages, which are private loans backed by the company who offers them.
Reverse Mortgage PitfallsWhile it may seem that all reverse mortgages are great deals, check again. Each lender offers various interest rates, so you'll want to shop around. Also, the interest on reverse mortgages are not tax deductible until the loan is paid off. And finally, a reverse mortgage can use up all or part of the equity in your home, leaving you with fewer assets.
So if you're considering a reverse mortgage, be sure to first weigh all your options. Consult with a mortgage counselor to obtain additional pertinent information and get the best deal for your situation. Then, let the equity in your home provide you with cash for retirement income, healthcare expenses, taxes, daily living expenses, and much, much more.
About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.
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