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| Reverse Mortgages Pay You Cash!
By Mark Barnes Direct Lending Solutions Staff Writer
How would you like for your home to pay you cash each month? Sound crazy? Not only is it not a ridiculous notion, it is a home mortgage fact. If you owe 40 percent or less of your original mortgage, or you own your home outright, there is a great program that is available to you – one that can actually generate extra monthly income. It’s called a reverse mortgage. The reverse mortgage is similar to a home equity loan, only in the fact that it pays you the equity you have in your house. The differences, though, are many. If you have a large amount of equity in your home, you’ll want to consider a reverse mortgage. The reverse mortgage does exactly what the phrase says. Instead of you making monthly mortgage payments, the bank literally reverses this action and distributes a monthly payment to the homeowner. Sound too good to be true? It’s not, and it’s a completely legitimate mortgage program. Banks like it, because at the end of the term of the loan (usually when the homeowner dies), the bank acquires the house and may resell it. Here’s how it works. Let’s say you own a home with a mortgage balance of $30,000 and it’s worth $100,000. So, your original mortgage may have been for $75,000, but you’ve paid down the loan over time, and the property has increased in value. The bank will put a new loan on some or all of the remaining balance, amortize it over 30 years and send you a check for this amount each month. Sometimes, they’ll use enough of the remaining equity to pay off your balance, so you owe nothing. Then, you get payments each month, and when you die, the house belongs to the bank. Let’s assume you have completely paid off your home loan. With zero mortgage balance on your home, the bank can easily create a reverse mortgage for 40 percent or less of your home’s value. You might start collecting checks for several hundred dollars, and you’ll never have to pay it back. This program is great for elderly people, who need to supplement their incomes. Check out the useful resources section below to learn more about this interesting mortgage program. If you have lots of equity, or perhaps no mortgage loan at all, your home can start paying you very soon. More information about reverse mortgages:In most cases, the funds the homeowner receives may be used for any purpose: to supplement a fixed income, to pay for at-home medical care, or to see the world. For an individual facing a retirement income shortage or an increased dependency on medical care, reducing home equity with a reverse mortgage may be preferable to selling the home to raise much-needed cash. There are three basic types of reverse mortgages: single-purpose, federally insured, and proprietary reverse mortgages. There are a few drawbacks to reverse mortgages. The closing costs normally exceed those for a conventional mortgage, which can make the loan expensive if the homeowner remains in the home for only a few years. Additionally, under certain circumstances, the proceeds from a reverse mortgage could affect the homeowner's eligibility for some public-assistance programs such as Supplemental Security Income (SSI) or Medicaid. The reduction in home equity could also reduce the homeowner's estate. Useful external resources:
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