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Reverse Mortgage Considerations

A reverse mortgage is a loan against the value of your home that does not have to be paid back for as long as you live in the home. Simply put, a reverse mortgage converts some of the equity in your home into income.

In Evaluating a Reverse Mortgage, Consider…

  • Typically, a reverse mortgage must be a “first” mortgage, meaning that if you still owe money on your home, you must pay off the existing mortgage before you can get a reverse mortgage (note: an initial lump sum payment from a reverse mortgage can be used to pay off an existing mortgage).
  • Keep in mind that, while you don’t have to repay a reverse mortgage for as long as you live in the house, the amount that ultimately has to be repaid does grow over time.
  • While the amount of debt grows over time, the reverse mortgage repayment cannot exceed the value of your home at the time it is ultimately sold.
  • If you take out a reverse mortgage, you continue to own your home. This means that you continue to be responsible for expenses such as property taxes, hazard insurance and home maintenance and repair.
  • Reverse mortgage proceeds may affect eligibility for assistance under state and federal programs.
  • The upfront costs associated with a reverse mortgage, such as an origination fee, closing costs and mortgage insurance premium, can be significant. This means that a reverse mortgage may be expensive if the loan is repaid within a few years of closing. As a result, if you anticipate moving within a few years, you should explore another alternative, such as a home equity loan.
  • Repayment of a reverse mortgage when your home is sold will mean less equity left to pass to your heirs.

Please contact my office if you would like additional information on reverse mortgages.

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