Reverse
Mortgage may provide senior with access to home equity
Sometimes called a Home Equity Conversion Mortgage, this type of Loan lets you access the
cash in your house without moving out of it. It's an attractive option if you are over the
age of 62 and own your home outright or nearly so. The amount of the loan is dependent
upon the age of the individual, the appraised value of the home, the interest rate and the
amount of repairs needed to bring the home up to FHA standards. Proceeds from the loan
usually come either in monthly payments or through a line of credit which you can use at
your discretion. Since the money you receive is a loan, it will not jeopardize your Social
Security Benefits or increase your taxes.
Following are the three basic types of Reverse Mortgages (most are adjustable rate):
The Term Mortgage provides a fixed monthly payment for a set number of years. At
the end of the term you may remain in your home, but interest will continue to accrue.
Payment is usually made in full when the homeowner dies or moves permanently from the
house.
The Tenure Option guarantees set monthly payments for as long as the individual
remains in the home. Because payments will continue even if all of the equity has been
drawn out, this option usually results in a monthly payment lower than the term mortgage,
yet offers the assurance of a lifelong monthly payment.
The Line of Credit gives the homeowner the option of withdrawing funds according to
need. It may be distributed in one lump sum payment, or used on more than one occasion to
pay medical bills or finance home repairs.
Advantages of the Reverse Mortgage:
1. Increases monthly income and/or establishes a line of credit to pay for major expenses
2. Provides tax free income with no restriction on the use of funds
3. Allows you to retain title to your home |
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Disadvantages
of the Reverse Mortgage:
1. Depletes equity in your home, some of which will be used for closing costs fees and
insurance premiums
2. May affect qualification for Old Age Pension, Medicaid, Food Stamps or Supplemental
Social Security Income
3. Reduces the value of your estate |
Other Considerations:
Home maintenance and insurance remain the homeowner's responsibility. For more information
on companies which offer reverse mortgages, call or write Senior Answers and Services at
3006 East Colfax, Denver 80206 303-333- 3482. |
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