Reverse Mortgages

Written by Tara Peris
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Reverse mortgages come in many forms, but on the whole, they share a few central features. Anyone considering this type of mortgage package should think carefully about the terms that typically come with a reverse mortgage, and about whether the specific features of the loan will prove safe and worthwhile. As with any mortgage package, there is potential for financial gain, but room for great loss if things are handled poorly.

Reverse mortgages typically are used by the elderly or by retired people who wish to supplement their incomes. As with traditional mortgages, the homeowner retains the deed to the home and is responsible for standard costs such as maintenance, insurance, and property taxes. However, the mortgage is "reversed" because lenders make monthly payments to borrowers.

Too Good to Be True?

If this seems too good to be true, consider the fact that this is still a loan like any other. Basically, a reverse mortgage allows homeowners to draw on the equity of their home in order to get tax-free cash. The money received from lenders each month is essentially a loan that is based on the homeowner's accrued equity.

It is important to remember that whenever you draw on your home equity, you run the risk of losing your home should you be unable to make payments on the loan. Although certainly a rare occurrence, it is one worth considering, especially for those headed into their retirement years. Research the risks and advantages thoroughly before making a decision, as there are several ways to capitalize on home equity without undermining your long-term stability.

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