Pros and Cons of Reverse Mortgages Explained

Guest Author — Sat, 24 Jul 2010 17:13:02 +0000

Let’s get right into it and cover the pros and cons of reverse mortgages. The home you’ve been sinking all your money into all these years may be good source of quick cash if you’re looking for a loan. A reverse mortgage is in essence a home loan that allows you to turn a portion of the equity you’ve paid into your home into cash. So instead of paying the lender, it reverses and the lender pays you. Basically, you’re using the value of your home to get cash.

This is a good option especially if you are what people call property rich and cash poor. A reverse mortgage could secure enough money for you every month for the rest of your life.

The amount of money you can get depends on what your home is worth. For instance, let’s say your house is worth $250-260,000 with no mortgage owed. A reverse mortgage could land you a lump sum payment of an estimated $128-$129,000. If you wanted to get that in a monthly lifetime payment, you would get about $706.00. You could also choose to simply get a line of credit if you prefer that option. The bottom-line to the formula is basically the more valuable your home is, and the older you are the more you can borrow.

Reverse mortgages are not for everybody, literally. To qualify for a reverse mortgage, you must be at least 62 years old. A lot of retirement age homeowners use reverse mortgages to supply an additional stream of income to their pension or social security.

Another requirement to get a reverse mortgage is that you must live in the home.

Reverse mortgages appeal to so many people because you don’t have to pay the money back as long as you live in the house and keep up other expenses like the taxes and insurance. If you still have a mortgage when you apply for the reverse mortgage, you or your heirs will have to pay back all your cash advances at the end of the mortgage. You could apply for a second mortgage, but then you’ll have to meet income requirements and have sufficient monthly income to repay the debt.

There are plenty of locations that can help you with more info before you decide about reverse mortgages. Always remember to be careful of sales people working in reverse mortgage specialist jobs too, as they usually have their commission in mind ahead of helping you – let’s be honest about that. AARP, FHA, HUD, your personal bank or credit union can all provide with you more information. You can also log on to http://www.bankrate.com for read up more on reverse mortgages.

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Pros and Cons of Reverse Mortgages Explained