When you are engaged in estate and retirement planning you want to stay right on top of the things that you have control over. But no matter how meticulous you may be there is always going to be some uncertainly involved due to the things that are out of your hands.
This having been said, the financial meltdown that occurred a couple of years ago threw a lot of long term plans off course. There are those who don’t have the liquidity that they expected to have, and some people who are in this position may want to consider a reverse mortgage.
First off it should be said that Home Equity Conversion Mortgages or HECMs are backed by the federal government. You even have to go through HUD approved counseling to obtain the loan, so these mortgages are completely above board and legitimate. Aside from HECMs here are also reverse mortgage products offered by private companies should you choose to go that route.
With a traditional mortgage you pay the bank or mortgage lender over a period of time and buy equity in the process. As the name suggests, reverse mortgages work the other way around. The lender makes a payment or payments to you and it acquires equity in your home in return for the payments. When you die or move, the reverse mortgage debt becomes due. If you pass away without ever moving your heirs would usually sell the house, pay the reverse mortgage, and keep the remainder. If you move, you can do the same thing.
You must be at least 62 years old to obtain a reverse mortgage, you must have significant equity in the home, and it must be your primary place of residence. There are fees involved that can be added to the loan balance, which is something to consider. And you must of course pay insurance and taxes on the house and keep it in adequate condition or the loan can be called in.
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