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Reverse Mortgages
What is a reverse mortgage?
A reverse mortgage is a way for homeowners to borrow
against the equity or value of their homes.
It is a mortgage that pays you a loan – you can receive the
loan as a line of credit, a lump sum or a series of monthly
payments. You can also receive a combination, for
example, one payment up front plus a series of monthly
payments.
It works in the reverse of a conventional or forward
mortgage. With a reverse mortgage, each time you
receive a payment, your equity in your home decreases
and your debt increases.
You never have to repay a reverse mortgage as long as you
live in your home. The loan is repaid when the owner
sells the home or dies. The estate can repay the reverse
mortgage with proceeds from the sale of the home or
from another source of funds.
Seniors with substantial home equity may find that a
reverse mortgage allows them to stay in their own homes,
tapping the equity for living expenses, or for construction
costs to modify the home to make it safer for a person
wtih limited mobility.
Who can take out a reverse mortgage?
• You must be at least 62 years old.
• Usually, you must pay off your mortgage or any other
debt against the house. You may be able to do this
with money you get from a reverse mortgage.
• Generally, your home must be your primary residence
– that means you must live in your home for most of
the year.
• Single home properties are eligible. Some programs
will provide reverse mortgages on condominiums and
two- to four-unit properties, if you live in one unit.
Mobile homes and cooperative apartments are not
eligible.
Cost
Upfront costs include an origination fee, mortgage
insurance premium and closing costs.
Reverse mortgages can be very expensive in the short
term. They are less costly the longer you have them.
A reverse mortgage through the Home Equity
Conversion Mortgage (HECM) program is generally
the least expensive. Plus, it is federally insured. However,
other types have higher limits.
Article adapted from http://www.wiserwomen.org/
Immediate Annuities
Many older people worry about whether they will outlive
their savings and not have enough money at the end
of their lives. For many people, an immediate annuity
makes sense.
An annuity can be purchased from an insurance company
for a lump sum and can guarantee and regular monthly
payment for the rest of the purchaser’s life. The downside
is that funds used to buy an annuity are generally not
available to pass on to heirs.
Immediate Annuities may be right for you if:
You have retirement expenses not covered by monthly
pension and Social Security benefits.
You have an expectation of living a long life. An
immediate annuity can be a good choice for individuals
who are in good health.
As with any financial product, you need to do your
homework and educate yourself about your options and
what the possible risks and trade-off are before buying
one.
Article adapted from http://www.wiserwomen.org/
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