Sunday, August 27, 2006

Reverse Mortgages

Huh? I've heard this mentioned a few times lately, so thought I'd do some digging and get the scoop for myself. And here you go...

According to the AARP (American Association of Retired Persons), a reverse mortgage is a loan on your home that you typically don't have to pay anything back on until you die, sell your home, or move. Borrowers can can opt for an immediate cash advance at closing, a creditline account that lets them take cash advances whenever at any time during the life of the loan, monthly cash advances or any combination of immediate cash advance, creditline account, and monthly cash advance.

Most reverse mortgages require the borrower to be at least 62, but unlike most loans, reverse mortgages have no income requirements, as there are no monthly payment requirements. Also, unlike a traditional mortgage with rising equity and falling debt, reverse mortgages generally have falling equity and rising debt.

Another interesting point is that most reverse mortgages are nonrecourse loans, which essentially means you can never owe more than the value of your home at the time you move, die, sell, etc. Your other assets remain free and clear. So even if you opted for monthly cash advances and lived to be 120, borrowing much more than the value of your home, you only owe as much as your home is worth.

This just scratches the surface. For some great info on reverse mortgages, visit reverse.org. They know these things inside and out.

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