Reverse Mortgage Info

What is a Reverse Mortgage?
Reverse mortgages are offered to seniors 62 or older who either have tremendous equity in their homes or own their free and clear and who wish to use extra money based on their equity. The lender gives a value to the property and lends based on that value. Money can be distributed to the owner every month or as a lump sum for the owner to live on to supplement social security and other income sources.

When is a Reverse Mortgage due?
Reverse mortgages are due upon the sale of the property or upon death of the owner.

What are some of the main risks of a Reverse Mortgage?

  1. Since the owner is still responsible for the property taxes and property insurance for the home, if the owner is unable to keep up with those the lender can foreclose on the property and the owner would then lose all their remaining equity, which for many could be their life savings
  2. When the owner of a home with a reverse mortgage passes away that the loan becomes due. This means that the children or heirs of the home need to either pay off the reverse mortgage out of their own funds or if they cannot do that they need to sell the home to pay off the loan. Of course if the heirs do neither then the loan would be in default and the home (along with any equity) could revert back to the lender.

While Reverse Mortgages might be a good or necessary avenue for some seniors, be sure to get sound legal advice on what the responsibilities are for the owner and who the property reverts to after death.

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