What Is A Reverse Mortgage?How Can You Benefit From One?
What is a Reverse Mortgage?
It is a loan made to you using your existing home as collateral. While this may sound like your standard home equity loan, it isn't.
With most loans, you begin paying back the borrowed amount soon after receiving the lump sum distribution of money. With this type of loan, however, you don't make any payments nor do you have to receive the loan in a lump sum.
Instead, the amount of the loan is repaid once the house is sold or you pass away. Also, you can choose to have the money distributed in monthly installments to provide you with additional living expenses.
Can a Reverse Mortgage Benefit You?
Imagine having the money to enjoy your retirement, pay off your debt, go on a dream vacation - these are the promises made by ads promoting this type of mortgage. They sound like an amazing opportunity but do they deliver?
Who Qualifies?
These mortgages don't have very strict rules about who qualifies for them. The two most important is that the youngest spouse is at least 62 years old and that you own your own home.
If you already have a mortgage on your home, you can still qualify for a reverse mortgage, too. The funds will be used to pay off that existing loan first and the balance will be distributed to you.
Although meeting those two criteria will enable you to get one of these loans, the amount of money you are eligible to borrow is determined by your age and the value of your home. You can never borrow more than what your home is worth.
Borrowers must also complete a counseling session before choosing this type of loan. The purpose is to make borrowers understand all of the details and have considered all of the available options.
What are the Advantages and Benefits
Money you can use as you want - No lender will be hovering over you asking about how the money will be or is being spent. You truly can use it for a dream vacation, medical expenses, or anything else you want.
It can be a safety net - If you are at risk of losing your home due to foreclosure or an inability to pay your taxes, then a it can provide you with the funds needed to protect your property.
You don't have to worry about being a burden - As parents of adult children, you may worry that your health or financial situation could make you a burden on your family. This type of mortgage can give you a nest egg to ensure that won't happen.
Despite the Advantages, There Are Some Drawbacks:
Your home cannot be passed on to children - Because the money earned from selling your home will repay the debt, you will not be able to will the property to your children. It will either have to be sold by your estate or it will revert back to the bank.
The upfront costs are high - When compared to other mortgages, the upfront costs of reverse mortgages are much higher. While they can be financed with the rest of the loan usually, these costs will all have to be paid back and will leave less funds available for your estate.
It is a loan made to you using your existing home as collateral. While this may sound like your standard home equity loan, it isn't.
With most loans, you begin paying back the borrowed amount soon after receiving the lump sum distribution of money. With this type of loan, however, you don't make any payments nor do you have to receive the loan in a lump sum.
Instead, the amount of the loan is repaid once the house is sold or you pass away. Also, you can choose to have the money distributed in monthly installments to provide you with additional living expenses.
Can a Reverse Mortgage Benefit You?
Imagine having the money to enjoy your retirement, pay off your debt, go on a dream vacation - these are the promises made by ads promoting this type of mortgage. They sound like an amazing opportunity but do they deliver?
Who Qualifies?
These mortgages don't have very strict rules about who qualifies for them. The two most important is that the youngest spouse is at least 62 years old and that you own your own home.
If you already have a mortgage on your home, you can still qualify for a reverse mortgage, too. The funds will be used to pay off that existing loan first and the balance will be distributed to you.
Although meeting those two criteria will enable you to get one of these loans, the amount of money you are eligible to borrow is determined by your age and the value of your home. You can never borrow more than what your home is worth.
Borrowers must also complete a counseling session before choosing this type of loan. The purpose is to make borrowers understand all of the details and have considered all of the available options.
What are the Advantages and Benefits
Money you can use as you want - No lender will be hovering over you asking about how the money will be or is being spent. You truly can use it for a dream vacation, medical expenses, or anything else you want.
It can be a safety net - If you are at risk of losing your home due to foreclosure or an inability to pay your taxes, then a it can provide you with the funds needed to protect your property.
You don't have to worry about being a burden - As parents of adult children, you may worry that your health or financial situation could make you a burden on your family. This type of mortgage can give you a nest egg to ensure that won't happen.
Despite the Advantages, There Are Some Drawbacks:
Your home cannot be passed on to children - Because the money earned from selling your home will repay the debt, you will not be able to will the property to your children. It will either have to be sold by your estate or it will revert back to the bank.
The upfront costs are high - When compared to other mortgages, the upfront costs of reverse mortgages are much higher. While they can be financed with the rest of the loan usually, these costs will all have to be paid back and will leave less funds available for your estate.