Reverse Mortgage Loan Blog

Many retired homeowners have found themselves in the position of being “house rich” and “cash poor”. Their home loans may be all paid off but inflation and other factors have widdled away at their savings and retirement. They, like many other retired folks, are looking for an answer to this predicament.

The Federal Trade Commission (FTC) says reverse mortgages “may allow some consumers to take advantage of their home as a valuable asset and convert it to a source of income without losing home ownership.” There are several types of reverse mortgages to choose from.

The homeowner can either take the money as a lump sum, a monthly advance, a line of credit, or a combination of all three. The borrower can continue to live in their home and he or she does not have to pay the money back as long as that home is their principle residence.

The amount you can borrow is usually based on your age, the amount of equity in your home and the interest rate the lender is charging. The FTC says that a “reverse mortgage may be used for any purpose.”

These loans are called “rising debt loans” Since there are no payments made the principle loan balance each month goes up because the interest is added to the loan. These loans can either be fixed or an adjustable rate mortgages.

But should a person take out a reverse mortgage? Talk to your financial planner first, but Bruce Williams in the Chester County Daily Local says “Since this is borrowed money, there are no taxes on it whatsoever. The lender will charge a previously agreed-upon rate of interest… In my opinion, this is no argument at all. You earned the money; there is no reason why you shouldn’t enjoy it.”

Found here.

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