tag:blogger.com,1999:blog-2397000584959862549.post-49434140918504670312008-07-24T08:00:00.001-04:002008-07-24T08:00:01.384-04:00Reverse mortgages allow homeowners (age 62 and over) to convert a portion of their home’s equity into cash that generally doesn’t need to be paid back as long as the borrower(s) lives in the home. Typically, the equity is paid out in monthly payments but can also be taken on an “as needed” basis.<br /><br />Reverse mortgages are attractive to cash strapped seniors that normally wouldn’t be able to meet the monthly payment obligations of a first or second mortgage, or a home equity line of credit (HELOC). The funds can be used towards anything from home repairs to exotic vacations and are generally tax free.<br /><br />The loan is repaid when you die (from your estate), sell your home, or no longer live there as your principal residence.<br /><br />As an added protection the Federal Housing Administration (FHA) guarantees you will never owe more than the selling price of the "mortgaged" house.<br /><br /><strong>Disadvantages of a Reverse Mortgage</strong><br />Reverse mortgages can be very expensive. Upfront costs associated with reverse mortgages approach 6% of a homes value. If you have sufficient cash flow, and your credit is reasonably good, a much better alternative is a home equity line of credit. <br /><br /><strong><em>If you have sufficient cash flow, and your credit is reasonably good, a much better alternative is a home equity line of credit.<br /></em></strong><br />Be cautious of anyone who tries to sell you an annuity or long term care insurance as a "package" with your reverse mortgage. The Federal Trade Commission and many leading financial planners see this as a conflict of interest and nothing more than an attempt to soak the consumer with more fees.<br /><br />Because of a reverse mortgage's "complexity" borrowers are required to meet with an independent counselor to help determine if a reverse mortgage is a wise course of action. Many retirees qualify for alternative lower cost "single purpose" government sponsored reverse mortgage programs, or low interest loans, when funds are needed for home improvement repairs or to pay outstanding property taxes.<br /><br />Never rush into signing up for a reverse mortgage. If you find that a reverse mortgage is right for you, compare the fees and terms of several lenders and choose the one that is best suited to you.Benhttp://www.blogger.com/profile/11744753986135785323noreply@blogger.com