Reverse Mortgages Pros and Cons
What is a Reverse Mortgage: Reverse Mortgages are generally only used by retired folks. The funds from a reverse mortgage can be used for retirement income or paying for healthcare expenses. A reverse mortgage allows the homeowner to extract some of the equity out of their home without having to sell the home or take out a home equity loan. In a reverse mortgage you receive cash from the bank and don't have to pay it back for as long as you live in the house. Just a general note, I don't think most banks will give anyone a reverse mortgage on a house that they are still making payments on. Again this type of mortgage is generally for someone who is retired and has their house paid off.
Whats the conclusion of a reverse mortgage: The conclusion is at the end of a reverse mortgage the bank get your house because you either died, sold your home or the home is no longer your principle residense. In other words if your retired parents did a reverse mortgage and they passed away and you thought you might get a windfall when you sell the house you might be sadly surprised.
Who can apply for a reverse mortgage: First of all you must be at least 62 and you have to live in the house that you are doing a reverse mortgage on. The proceeds from the mortgage are generally tax-free and most do not have any income restrictions.
In conclusion a reverse mortgage is a tool that can be used at retirement. It is not for everyone, make sure you shop around and get several opinions. I would also consult a financial advisor or CPA to confirm if it is right for you. You may qualify for other assistance and may not need to do a reverse mortgage.
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