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Reverse Mortgages

Reverse Mortgages

One of the real estate phrases heard these days is reverse mortgage. Courtesy of Real Estate Ink, a full-service boutique real estate brokerage in Melbourne, FL offering full service property solutions for the Brevard County and the Space Coast. Below is a quick primer on reverse mortgages.

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  • Definition: a type of loan where a lender makes payments to the homeowner in exchange for equity in the homeowner’s house, which is the opposite way a customary mortgage loan works. The proceeds from a reverse mortgage is received in either a line of credit, a lump sum of cash, monthly payments (for a set time period or as long as you own the house), or some type of combination of those first three options.
  • Interest begins to accrue, as well as mortgage insurance that the homeowner is responsible for, when the lender begins their payments to the borrower.
  • A reverse mortgage is paid back to the homeowner when the person dies, vacates the property for longer than a year, or sells the house. Factors such as age, value of house, and interest rates influence the amount you can receive through a reverse mortgage.
  • You must be over age 62 to get a reverse mortgage, and your house must conform to HUD standards. The owner must have sufficient equity in their home to warrant a reverse mortgage, and the reverse mortgage lender must be the first lien holder on the property.
  • As opposed to conventional mortgages, borrowers are responsible for paying their own insurance and taxes.
  • Reverse mortgage can help people get extra money to cover expenses, or provide additional income to supplement their retirement or Social Security income. Income from a reverse mortgage doesn’t affect Social Security or Medicare eligibility.
  • Borrowers retain the title to their home.
  • Reverse mortgages are an expensive form of borrowing, and cheaper alternatives do exist, like home equity lines of credit.
  • The owner actually ends up owning less of their house, so if the person plans to leave the house to a relative, such mortgages are likely not in their best interests.

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