Consider A Reverse Mortgage As Your Last Option

Consider A Reverse Mortgage As Your Last Option



Consider a​ reverse mortgage - as​ your last option
Home buyers often save rigorously for their home,​ forgoing expenditures and making sacrifices to​ pay down the​ mortgage and save for retirement .​
At retirement they get to​ enjoy their dream home debt-free .​
The only problem with this scenario for a​ lot of​ retirees is​ that they live on​ a​ fixed,​ and often not very large,​ income.
One option is​ to​ take a​ reverse mortgage - a​ loan against the​ home,​ which brings you​ money while you​ still live in​ your home .​
You can usually borrow between 10 to​ 40 percent of​ the​ value of​ your home depending on​ your age .​
a​ reverse mortgage loan requires no repayment for as​ long as​ you​ live in​ your home and you​ will never owe more than the​ value of​ your home.
This loan is​ different from a​ traditional mortgage in​ two ways .​
In order to​ qualify for a​ traditional mortgage,​ the​ bank checks your income to​ see how much you​ can afford to​ repay each month,​ but with a​ reverse mortgage there are no monthly repayments .​
With most loans,​ if​ you​ fail to​ make your repayments,​ you​ are in​ trouble .​
With a​ reverse mortgage,​ you​ don't have any repayments .​
Thus,​ the​ debt grows larger as​ you​ keep getting cash advances and the​ interest is​ added to​ the​ amount you​ owe .​
This is​ why a​ reverse mortgage is​ called a​ rising debt,​ falling equity loan .​
As the​ amount you​ owe (your debt) grows larger,​ your equity (the value of​ your home less debt) is​ getting smaller.
You can receive income from your reverse mortgage in​ two ways .​
You can take the​ loan and invest it​ in​ an​ annuity .​
In turn,​ this annuity will provide you​ with income until your death .​
The second alternative is​ to​ receive monthly income from your reverse mortgage provider .​
Here you​ simply increase the​ size of​ your loan on​ a​ regular basis in​ order to​ receive income.
There is​ one big downside to​ all of​ this - you​ still owe money on​ your home .​
The total amount you​ will owe at​ the​ end of​ the​ loan will equal the​ loan plus all the​ interest accrued .​
All the​ interest can be a​ substantial amount of​ money .​
Before you​ apply for a​ reverse mortgage,​ discuss your options with your family .​
Remember that a​ reverse mortgage will reduce the​ size of​ your final estate.




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