Reverse Mortgages: the Pros & Cons
Posted by admin in Real Estate
© james.thompson
JD over at Get Rich Slowly took a look at reverse mortgages a couple of days ago. There's a lot of hype (and advertising) out there on the subject. But do you know anyone who's actually doing it?
What is a reverse mortgage?
What is a reverse mortgage? If you own a home and are 62 or older, a reverse mortgage is a way to convert some of your home equity into cash. Rather than make monthly payments to your lender, your lender is making payments to you. The money you borrow through a reverse mortgage is paid back, with interest, when you move out of your home, sell your home, or die.
JD points out that there is considerable flexibility with a reverse mortgage. You can get cash in the form of a line of credit, a monthly check, or even a lump sum. And your credit history is not an issue because the amount you get is based on the value of the house and on your age.
There are some drawbacks. If you think a reverse mortgage will solve your financial problems, well, it might. But if your financial problems stem from the fact that you don't manage money well, then it probably won't help you much (though it may cost you your house, eventually).
JD looks in detail at how a reverse mortgage might affect your taxes and your elligibility for government programs like medicare. The article is worth reading.
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