Reverse mortgage enables older homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is “reversed". Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you.
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There are a number of factors that determine which include:
Yes, counseling is one of the most important consumer protections built into the program. It requires an independent third-party to make sure you understand the program, and review alternative options, before you apply for a reverse mortgage.
HUD-approved counseling agency, or a national counseling agency, such as AARP (800-209-8085), National Foundation for Credit Counseling (NFCC - 866-698-6322), and Money Management International (877-908-2227). Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.
Here is the most important reverse mortgage information you need to know: the money you get from a reverse mortgage is actually money you already had, money that was in a sense sitting unused in your home in the form of home equity. If you think of it that way, it's easy to understand why you can use the money you get for almost anything.
Anything from credit cards to home equity lines of credit to car loans. Please review all loan agreements.
Note: Consolidating debt may result in higher overall interest cost over the life of the loan. Consult your financial advisor on paying short term debt with your mortgage loan.
Many people like the feeling of security they get from having a financial "cushion".
Your home is probably your most valuable asset and you can use the reverse mortgage money to maintain, or possibly increase its value.
With a reverse mortgage, you will pay off your first mortgage (if applicable) and completely eliminate the need to make required monthly mortgage payments, giving you more disposable income each month.
Freeing up cash with a reverse mortgage may help you afford components of a financial plan.
Such as travel or hobbies. Don't let lack of money keep you from doing the things you've always dreamed of doing. A reverse mortgage makes them possible.
You can take the money from a reverse mortgage as a monthly payment to supplement your existing income, or you may choose a line of credit or a lump sum.
Pay for tuition or establish an education fund for grand kids, help a child buy a new house or just use your reverse mortgage to give gifts to the people you care about. The choice is yours.