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To Buy Or Not To Buy A Home With A Reverse Mortgage
Many homeowners are now looking to buy a home with a reverse mortgage.
Tremendous growth in the housing market over the last few years has
given many homeowners a considerable boast in equity.
Take for instance, Doris and Robert who purchased their home 45 years
ago for about $15,000. Now in their mid-seventies the couple is
pleased to discover that area home values have skyrocketed and single
family homes like theirs are currently selling for a minimum of
$150,000.
Doris and Robert like many other homeowners who originally purchased
their home for a modest price and have maintained the same residence
for a number of years are now retiring and finding reverse mortgage
value in their home equity.
Seeking a change, many of these homeowners are looking to buy a home
with a reverse mortgage. They are now thinking that the equity they
have built up could be used to finance a second home in the country or
a waterfront cottage.
While only a very small percent of mortgages are actually the reverse
type, reverse mortgages are gaining in popularity.
Federally insured since the late 1980’s, the reverse mortgage allows
mortgage-free homeowners to borrow against their equity.
Traditionally, homeowners only saw the disadvantages of a reverse
mortgage and regarded them as a last ditch effort to avoid
foreclosure, pay medical expenses in later years or to keep their home
in good repair. Today’s senior homeowners however are turning to a
reverse mortgage as a creative way to enhance their retirement years.
A reverse mortgage now provides retiring couples with an opportunity
to enjoy the fruits of their labor. They have raised their families,
paid off their mortgage during their working years and are now looking
to enjoy a few luxuries. Further, couples who never had an opportunity
to travel can now do so by dipping into their home equity.
When you buy a home with a reverse mortgage you are able to pay cash
for the second ‘vacation’ home while continuing to live in your
primary residence for as long as you wish or are able. Once you die,
your primary residence is usually sold to pay back your reverse
mortgage loan, while the second home becomes part of your estate.
In order to buy a home with a reverse mortgage you also must be age 62
or older. As a reverse mortgage borrower, you can opt to receive a
lump sum, a line of credit, or regular monthly payments.
While this may seem like a win-win situation for the senior homeowner,
the borrower must beware. It’s important to proceed with caution when
dealing with what is quite possibly your single largest asset.
Only after careful consideration should you buy a home with a reverse
mortgage. Reverse mortgages are not for everyone and borrowing against
your equity can quickly turn into a negative if you don’t fully
understand the advantages and disadvantages of a reverse mortgage.
One of the major disadvantages of a reverse mortgage is that you would
not have the funds available should you or your spouse, require
long-term home or hospital care and all your money is tied up in a
reverse mortgage.
Despite the potential drawbacks, such mortgages programs are allowing
today’s seniors the opportunity to buy a home with a reverse mortgage
and enjoy the retirement they always dreamed of.
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