Reverse Mortgages Funding
Retirement |
By Sergio Haros |
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With people living longer and longer, funding retirement can become
a stressful situation. Reverse mortgages can help home owners
avoid worries about cash flow.
Reverse Mortgages
Reverse mortgages are essentially a method for turning the
equity in your home into cash. Although there are various
options, a typical reverse mortgage will provide you with a lump
sum, monthly payments or a credit line based on the equity in
your home. The mortgage will have a term of a certain number of
years. Instead of making payments on the loan, the bank will
become the owner of the percentage of your equity applied for
the loan at the end of the term.
Reverse mortgages are
only available to older applicants. Every person listed on the
deed of the home must be 62 years of age or older. You must also
use the home as your primary residence.
The decision to
pursue a reverse mortgage can be a tricky one. The biggest issue
is an emotional one. We are all mentally trained to buy a home
and try to build equity over the years. With a reverse mortgage,
we are making the mental leap to actually reduce the equity in
our homes. While this may sound like a sensible method for using
the nest egg equity, it makes you, me and everyone very nervous.
For some seniors, the reverse mortgage decision makes sense
while it doesn‘t for others. To limit the potential for problems
and scams, banks are required to have senior applicants meet
with unbiased third parties to determine the benefits and
downside of using reverse mortgages.
If you or your
parents have reached retirement age and are facing cash flow
problems, you need to become flexible in dealing with finances.
Reverse mortgages may be one flexible option that makes sense
for your particular situation. After all, you can’t take the
equity in a home with you. |
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