LAKE HAVASU CITY PROPERTIES ON REAL ESTATE
WHAT IS A REVERSE MORTGAGE?
Originally
designed for retirees interested in keeping their homes but whose
incomes aren't sufficient to support them, reverse mortgages have
typically been used to help people on low fixed incomes make ends meet,
make needed home repairs or pay for large medical bills that otherwise
would be unaffordable.
If you're 62 or older and own your home you have the option of using your house as a source of tax-free income.
You're
eligible to apply for a reverse mortgage, which is a loan against your
home equity. You may receive the money in one of four ways: a lump-sum
payment, a monthly payment, a line of credit or some combination of
these. In most instances, there is no restriction on how the cash is
used and it's not subject to income tax.
Unlike in a traditional
mortgage or home-equity loan, where you pay the loan back on a monthly
basis, you only have to repay a reverse mortgage when you die, sell
your home or no longer use it as your primary residence, whichever
comes first. Lastly, you - or your estate - will never owe more than
the value of your house, no matter how high your loan balance is when
the mortgage is paid.
Reverse mortgage is complex -- and
potentially expensive - product. It's so complex, in fact, that you are
required to receive counseling before applying for one.
One
of the greatest appeals of reverse mortgages is that you can be
guaranteed a source of money for as long as you need it, even if you
live beyond your life expectancy.
You
pay for that guarantee however, through interest, higher-than-usual
closing costs, and servicing fees and in many cases insurance premiums
that protect the lender from the possibility that the loan payments
will exceed the value of your home. Those costs can be and often are
added to your loan balance, but they will be subject to interest. All
interest on your loan balance is tax-deductible, but you or your estate
may only take that deduction when the loan is paid back.
Besides
cost, another potential downside is that since you spend part or all of
your home equity before you die, a reverse mortgage reduces what you
are able to leave your heirs.
For
low-income seniors who depend on Medicaid and Supplemental Social
Security, it's critical that they don't receive more in monthly reverse
mortgage payments than they're going to spend. Money from a reverse
mortgage that sits in a bank account may put a retiree over the
allowable limit for liquid assets set by these public-assistance
programs.
If you have other
resources to draw on first or if you want to leave your heirs the full
value of your home, it may not be the right solution for you. However
this is a safe plan that can give older Americans greater financial
security, supplement social security and medical expenses. http://www.mortgagefit.com/
For buying or selling real estate, call Dean Baker owner/Broker Lake Havasu City Properties, top selling salesperson for 14 years. Cell phone 928-486-3368 or (888) 854-7210.