A Home Mortgage Type You May Not Have Heard Of: Reverse Mortgages
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by: marciafreeman
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Is your home mortgage tying up a large amount of your personal equity? Do you need a new source of income? And are you 62 or older? If the answer to all three of these questions is yes, you may be a candidate for a reverse mortgage. When you take out a reverse mortgage, a lender makes home mortgage payments to you against the value invested in your house. You may choose to get the value of your property in monthly payments or in a lump sum. You are allowed to remain in your house until you move away, enter a retirement community or nursing home, or pass on.
If I get a reverse mortgage, will it cancel my existing home mortgage?
No, but you are strongly encouraged to pay off the remainder of any existing home mortgages with the proceeds of your reverse mortgage. Depending upon where you live, you might not be allowed to have any other home mortgages than the reverse mortgage on the property, so you may need to pay off your previous mortgages with the proceeds of the reverse mortgage before you can begin to use the income for other purposes.
Can I will my house to my heirs if I take out a reverse mortgage on it?
Yes. Your heirs may repay the value of the reverse mortgage, attempt to sell the house to cover the cost of the reverse mortgage, or let the bank or other lender resell the house itself. Your heirs may need to take out a new home mortgage on the property to cover the cost of the reverse mortgage. However, taking out a reverse mortgage strongly decreases the likelihood that the property will stay in the family. Consider a reverse mortgage only if passing on your house to your heirs is not important to you.
What happens if the lender finishes making all the loan payments during my lifetime?
If the lender completes the full series of reverse mortgage payments while you are still alive and living in the house (that is, if you receive the full value of the house), you do not need to relinquish your house to the lender and move out. You may keep the money and continue to live in the house for as long as you need or want to. Staying in the house will not create a debt for you, your heirs, or your estate. In fact, it is not possible for a reverse mortgage to put you into debt. This is one of many reasons that homeowners find reverse mortgages more appealing than a normal home mortgage. Reference Home equity loans -- Mortgage -- Mortgage refinancing --
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