CONVERTING HOME ASSET TO INCOME WITHOUT SELLING
House rich and money poor homeowners could benefit from a reverse mortgage.
This type of mortgage allows some consumers to take advantage of their home
as a valuable asset and convert it to a source of income without losing home
ownership. This style is called a “reverse mortgage”, and is where
the lender pays you—in a lump sum, a monthly advance, a line of
credit, or a combination of all three—while you continue to live in
- To qualify for a reverse mortgage, you must own your home.
- Funds received are yours for any purpose you may want.
- Loan eligibility factors are; your age, the equity in your home, and the
interest rate the lender is charging.
- You are responsible for maintaining your home and paying all real estate
- Depending on the plan you select, your reverse mortgage becomes due with
interest when you move, sell your home, reach the end of a pre-selected loan
period, or die
- When you die, the lender does not take title to your home, but your heirs
must pay off the loan. Selling the home or refinancing is a common repayment
- The three type—FHA-insured, lender-insured, and uninsured —vary
according to their costs and terms. Select the type best suited for your needs.
- Reverse mortgages typically charge loan-origination fees and closing costs.
Insured plans charge insurance premiums; some plans have mortgage servicing fees.
You may be able to finance these costs if you want to avoid paying them in cash.
- Reverse mortgages are rising-debt loans. Interest accrues to the balance
each month, and the amount you owe increases over time as the interest compounds.
- Some reverse mortgages have fixed-rate interest; others have adjustable rates
that can change over the lifetime of the loan.
- There are various reverse mortgage plans offered today. Consult your attorney
or financial advisor about the tax consequences of the particular plan you are
The federal Truth in Lending Act (TILA) requires lenders to disclose the costs
and terms of reverse mortgages. This includes the Annual Percentage Rate (APR)
and payment terms. If you choose a credit line as your loan advance, lenders
also must tell you of charges related to opening and using your credit account.
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Information provided by this website is general and is not a substitute for professional
advice. Please consult your investment advisor and/or attorney before entering
into any transaction.