| Let's start on a positive
note, you could do what most borrowers
do and opt for the
reverse mortgage line of
credit. Just think about how you would
then be able to draw on the loan whenever
money is required for daily living expenses,
medical bills, prescription costs, home
repairs, etc. A reverse mortgage could
really enhance your retirement years including
in-home care expenses in later years.
Furthermore, your reverse mortgage
income does not affect regular Social
Security payments or Medicare benefits.
And lenders cannot foreclose on the
loan for the life of the borrower.
Okay, that's all well and good but
how do I turn the major disadvantages
of a reverse mortgage into a positive?
It's all in the perspective. For every
negative there is a positive to obtaining
a reverse mortgage.
It's true a reverse mortgage
loan may affect your eligibility for
state and federal government assistance
programs such as Medicaid but it also
gives you an important financial cushion
and does not (as mentioned above) affect
your regular Social Security payments
or Medicare benefits.
You also have no monthly payments to
make. Granted, the amount you owe continues
to grow larger over time but you also
have more cash on hand to enhance the
quality of your current
lifestyle. Look at it this way,
you will now have all the money you
need (and want). After all, it's your
money. True, you won't have the full
selling price of your home to leave
your loved ones but if they're financially
sound in their own right, do they really
need a substantial inheritance?
It all comes down to what's important
to you, what your current financial
needs are and
if leaving money to heirs is
something you feel you need or want
to do.
Now let's take a look at the basics
of a reverse mortgage.
A reverse mortgage is essentially
a special type of loan that seniors
can use to convert the equity in their
homes to cash. At one time, the only
way to get money from your home was
to sell it and move or borrow money
against it.
One of the pros of a reverse mortgage
is that you continue to own your home
and the
lender instead makes payments
to you.
Certain qualification requirements
must be meet in order for reverse
mortgage loan to take place.
*All homeowners
looking to obtain a reverse mortgage
loan must be at least 62 years old.
*Anyone seeking a reverse
mortgage loan must undergo mandatory
counseling from a HUB (the U.S. Department
of Housing and Urban Development) approved
counselor prior to actually applying
for a reverse mortgage. This
counseling is essentially an in-person
or telephone session that outlines the
process and is used to determine eligibility.
*As with a conventional mortgage there
are certain costs involved in the reverse
mortgage process. Costs may include
application fees, closing costs, insurance,
appraisal fees, credit report fees,
and quite possibly a monthly service
fee.
*A reverse mortgage loan
requires no repayment for as long as
you live in your home. When the home
is sold and the borrower moves, or the
last living borrower dies, the loan
must then be repaid. In most cases,
the home is sold to repay the mortgage.
* The borrower however is still
responsible for property taxes, insurance
and repairs. If these payments are not
maintained, the loan could become due
in full.
As discussed previously you need to
seriously examine any disadvantages
of a reverse mortgage as well as
any advantages.
Disadvantages of reverse mortgages
could include tax consequences but remember
a reverse mortgage is not classed
as taxable income. Your perspective
and how you want to make your home work
for you is the key to using a reverse
mortgage to your benefit..
Please know too that the amount of
money you may receive from a reverse
mortgage
depends on several factors of
which include your age and the type
of reverse mortgage selected
as well as your appraised home value
and current interest rates. As a rule,
the older you are, the more valuable
your home and the less money you owe
on it - the greater your pay out would
be.
That said, you need to determine for
yourself if the advantages outweigh
any disadvantages of a reverse mortgage.
Remember, it's a personal choice. What
might be right for one homeowner may
not be right for the other.
The bottom line is a reverse mortgage
can be a beneficial loan product when
entered into with a full understanding
of the advantages and disadvantages
of a reverse mortgage. For seniors
who are in need of money to cover growing
expenses and to enhance the quality
of life in their later years it can
be a real blessing.
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