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Reverse Mortgage: Is It Right For You:

A reverse mortgage is a type of home equity loan which allows homeowners to convert part of the equity in their homes into tax-free income without having to sell their home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is seen as an important retirement consideration for many people. Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. These payments can be a supplement to Social Security for people after the age of retirement.

To qualify for a reverse mortgage:

• You must be the titleholder of the property
• You and all other borrowers must be 62 or older
• Your existing mortgage balance must be paid off at closing
• Your home must be an eligible property type

What’s an eligible property type?

• Single family home
• 2–4 unit multi-family home (one unit must be your primary residence)
• Condominium
• Planned unit development
• Modular home
• Manufactured home (available only with Home Equity Conversion Mortgage)
• Located in an eligible state
• Ineligible properties include a cooperative (co-op) or mobile home.

When would a reverse mortgage not be a good idea.

• You want to leave your home to your heirs, and they will not or cannot pay back the loan with other funds or financing
• You are considering moving within a few years
• You’re looking for funds to invest

How much do you receive?

The reverse mortgage loan amount you may receive varies based on which reverse mortgage product you choose, your age(s) as the borrower(s), the appraised value of your home, and current interest rates. Generally, the more valuable your home is and the older you are, the more you can borrow.

When will the loan mature and the balance become due?

• The last remaining borrower passes away
• The last remaining borrower sells the home
• The borrower fails to live in the home for more than 12 consecutive months

Other circumstances that may cause the loan to become due include:

• You transfer the title to another person or entity
• You fail to pay property taxes
• You fail to maintain and/or repair the home
• You fail to keep the home insured

Loan amount owed:

You’ll never owe more than the appraised value of your home. When the loan balance becomes due and payable, your home will be re-appraised to determine its value. Based on the appraised value and the outstanding loan balance, two scenarios are possible: the loan balance is less than the appraised home value, which means you or your heirs only owe the loan balance, or the loan balance is more than the appraised home value. If the loan balance is greater than the appraised home value, you or your heirs owe the appraised home value, but nothing more. You or your heirs may sell the home in order to pay the balance.

Potential effects on taxes and government aid:

With any reverse mortgage, it’s important to understand how your existing financial situation may be affected. A Reverse Mortgage may affect your tax status and/or your eligibility for government aid programs. Also, your eligibility to participate in any real estate tax deferral program offered by your city or county may be affected. For additional information about your specific situation, it is recommended to consult with a tax professional.

Since you still own your home when you get a reverse mortgage, you are still responsible for paying your property taxes. You may use the proceeds from a reverse mortgage to help make these payments. It’s important that you keep your taxes current because the loan may become due if they’re not paid.

Reverse mortgages don’t affect entitlement programs such as Medicare. However, certain need-based government aid programs, such as Supplemental Security Income (SSI) and Medicaid, may be affected. It is recommended that you consult your Medicare, Social Security or Medicaid administrator to determine the specific rules surrounding SSI and reverse mortgages.

Insurance: After getting a reverse mortgage, you will continue to be responsible for maintaining an acceptable amount of property insurance, including flood insurance, where necessary.

Fees: There are reverse mortgage fees which are similar to those you’d pay on a first mortgage. All of the fees can be financed with the loan, so you’ll have no out-of-pocket expenses. Fees can vary, depending on which reverse mortgage product you choose.

Darlene's Housing Tips Articles:

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Common Selling Mistakes

3 Key Negotiation Strategies for Maximizing your Buying Power

Tips to Home Staging
Reverse Mortgage Is it Right For You

Landscaping a Way Towards Great Curb Appeal
How to Save on Your Heating Bill
Home Staging Keys to Profit

Holiday Tree, Lights, Decoration Safety

Opportunities vs Obstacles in the Housing Market

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