Page 25 - Book12E

CHAPTER 2
The Pros and Cons of Reverse Mortgages
As reported by the Federal Trade Commission (www.ftc.gov), many consumers in the United States age 62 or older are “house-rich and cash-poor”—meaning that their mortgages are paid off, but they are living on fixed or limited incomes. Whether seeking money to finance a home improvement, supplement their retirement income, or pay for healthcare expenses, many older Americans are turning to “reverse” mortgages, which allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.
How Reverse Mortgages Work
In a “regular” mortgage, you make monthly payments to the lender. But in a “reverse” mortgage, you receive money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgage loans can be received in a lump sum, a monthly advance, a line of credit, or a combination of all three—while you continue to live in your home. To qualify for a reverse mortgage, you must own your home. The amount you are eligible to borrow generally is based on your age, the equity in your home, and the interest rate the lender is charging. Funds you receive from a reverse mortgage may be used for any purpose.
With a reverse mortgage, you retain title to your home. You are responsible for maintaining your home and paying all real estate taxes.
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