Turn Your Home Mortgage into a Source of Income
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by: marciafreeman
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Is a considerable amount of your net worth tied up in your home mortgage? Do you need a new source of income? And are you 62 or older? If you answered yes to all three questions, you should give serious thought to a reverse mortgage. When you take out a reverse mortgage, a lender makes home mortgage payments to you against the value invested in your house. You may choose to get the value of your property in monthly payments or in a lump sum. You are allowed to remain in your house until you move away, enter a retirement community or nursing home, or pass on.
Will my taking out a reverse mortgage cancel out my current home mortgage?
No, but the proceeds of the reverse mortgage will pay off the remainder of your home mortgage. In some areas, homeowners are not allowed to have both a regular home mortgage and a reverse mortgage on the same piece of property. If you live in one of those areas, you will be required to put your reverse mortgage payments toward your home mortgage, and will not be able to use the income for other purposes until your mortgage is paid off.
Will my heirs still be able to inherit my house if I take out a reverse mortgage on it?
Of course. Your heirs may redeem the reverse mortgage by repaying the income you received from it. They may also sell the house themselves or let the lender resell the house to cover the cost of the reverse mortgage. It is possible for your heirs to cover the cost of the reverse mortgage, effectively taking out a new home mortgage on it. As you can see, although it is possible to keep the property in the family, the extra expense of a reverse mortgage makes it strongly unlikely that your heirs will choose to redeem the reverse mortgage and keep the property in the family. You should consider a reverse mortgage only if you are not interested in having your heirs live in your house after your death.
What happens if the lender finishes making all the loan payments during my lifetime?
If you take the value of the loan as a series of payments, and you receive the last payment (that is, the full value of the house) well before you plan to leave the house, you are not required to give your house to the lender and leave. Because a reverse mortgage guarantees you the right of tenancy during your lifetime, you may live in the house as long as you like, without any obligation to return any part of the money to the lender. Staying in the house will not create a debt for you, your heirs, or your estate. In fact, it is not possible for a reverse mortgage to put you into debt. This is one of several points that makes reverse mortgages more attractive than a regular home mortgage. Try this Mortgage | Home loan |
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