Senior citizens who are living on a fixed income often wonder if they’ll outlive their savings, a very real fear in these days of declining investment portfolios. After last fall’s financial debacle, some people who own their homes wonder if they’ll be able to stay put or be forced to sell and move into an apartment.
One option available for mature American homeowners is a reverse mortgage or a home equity conversion mortgage (HECM). An HECM allows seniors to tap the equity in their homes without selling their property, a move which could keep them in their houses for the rest of their lives.
With an HECM, your heirs would handle your estate, selling off your home and keeping the proceeds after the HECM is paid off. Of course, this option reduces what your heirs receive, but it can keep seniors in their homes for the long term.
The following advice about reverse mortgages comes from the LendingTree Smart Borrower Center:
- Reverse mortgage candidates must be at least 62 years of age, have significant equity in their property, and be looking for a reverse mortgage on their primary residence only.
- Anyone who intends to apply for a reverse mortgage is required by law to complete a 45-minute counseling session with a HUD (Housing and Urban Development) approved counselor*.
- The sum from a reverse mortgage can be paid to you in a couple of different ways; all at once in a single lump sum of cash; as a regular monthly loan advance or as a credit line that lets you decide how much cash to use and when to use it; or you may have the option to choose a combination of any of these payment plans.
- The amount of cash you can get from your home’s equity is determined by a number of factors including your age, your home’s value and location, and current interest rates.
- Reverse mortgages may have tax consequences, could affect eligibility for assistance under Federal and State programs, and may have an impact on the estate and heirs of the homeowner.
Seek legal counsel and consult your family members before opting for a reverse mortgage. Though the guidelines are stringent, you want to make sure that what you sign passes legal muster and that your family is aware of your plans.
Certainly, a reverse mortgage isn’t for everyone and it is decision that should be well thought out with all options considered.
Source: Lending Tree
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