A reverse mortgage is a special type of private home loan that lets homeowners convert the equity in a home into cash. While we are all familiar with the monthly payment formats of conventional mortgages, the reverse mortgage, in contrast, allows eligible homeowners (typically those 62 years of age or older) to borrow against the value of their home. The equity built up over years is paid by the lender in a stream of payments (or possibly in a lump sum). Unlike a traditional home equity loan or second mortgage, no repayment is due, under most plans, until the home is no longer used as a principal residence, a sale of the home, or death.
Benefits of a
Reverse Mortgage
- Improved cash flow—improved quality of life.
- Pay off your current mortgage—no more payments!
- Receive lump sum cash at closing
- Receive cash as needed.
- Receive a monthly check
The total amount of money you can receive from your house is limited. The amount is determined by the age of the youngest borrower, the value of the house, and the interest rate at the time of closing.
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The total amount of money you can receive from your house is limited. The amount is determined by the age of the youngest borrower, the value of the house, and the interest rate at the time of closing. |
Money Received is Tax-Free
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Because the money received by the borrower is not income, there are no income taxes to pay and the money received can be used for any purpose: |
- Pay for basic living expenses
- Purchase long-term care insurance
- Pay for medical expenses not covered by insurance
- Help finance your grandchildren's education
- Fulfill lifelong dreams that were previously unreachable
Homeowner maintains
ownership of the home.
Since the owner retains all ownership rights, any appreciation in the value of the home belongs to the homeowner.
In many cases, despite the interest being charged on the outstanding balance of a reverse mortgage, the homeowner's equity in the property actually grows over time. This is possible because the reverse mortgage interest rate is low and is charged only on the outstanding balance of the loan, whereas the rate of appreciation of property values (which can easily be 4%, 8%, or more) operates on the full value of the home. |
Consult a specialist today
Below are a list of PDFs and resources to learn more about reverse mortgages.
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