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Michael Neal,  in Dripping Springs, TX

someone give me the pro and con on this reverse mortgage thing, and is this taxable income

Asked by Michael Neal, Dripping Springs, TX Thu May 10, 2012

I would like to know, there seems to be a surge of advertisment on the tube, It sounds not right to me

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A reverse mortgage enables homeowners age 62+ to convert part of the equity in their home into tax free cash without having to sell their home, give up title or take on a new monthly mortgage payment. No monthly payments are due on a reverse mortgage while it is outstanding - home equity is released in one lump sum or in multiple payments to the homeowner. I was able to help my parents find the best reverse mortgage. They are able to compare multiple banks/lenders so they were quick in giving me multiple quotes. They are really friendly and can ask them any question about the HECM program.

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10 votes Thank Flag Link Thu May 2, 2013
When getting a reverse mortgage, look at the cost of the loan in total. The reverse mortgage is extremely expensive money, often not much different than the percentage rate charged when taking a credit card cash advance.
0 votes Thank Flag Link Sat May 12, 2012
If you are not concerned about passing down your legacy to family, it may be a good tool. You are essentially borrowing against your home at a higher than average rate of interest. If you die before the equity is used up, your family has to right to sell the home at market value to pay what you owe and keep the remainder. Keep in mind that this figure includes the interest. the upside is that if you use up your equity before you die, the bank cannot make you leave. At least this is the way it was several years ago.

Irina makes a great point. Keep in mind that the bank is offering this program as another way to boost their income/assets column. They will be taking into consideration your life expectancy and the perceived market at that time. Thus, they will not give you the maximum of what your home is worth. There is a rather generous cushion that benefits the bank.

Please keep in mind that these types of programs change frequently as do the rules. It is important to look into the details for your particular situation along with your attorney and accountant before making this step. It is not for everybody.

This is not legal advice and should not be construed as such.

Hope that helps.
0 votes Thank Flag Link Fri May 11, 2012
Hello Michael,

When getting a reversed mortgage - you are not getting your full equity being paid back to you, but
only a certain allowed conservative LTV (Loan to Value).

Each lender has different guidelines as to how much of your equity will become a mortgage, so it's good to look into different types of lenders, who do reverse mortgages (not all do).

The good part is that you are being paid back your own money/equity gained in the property.

You have to make sure that you read all paperwork in connection with the mortgage, and you also have to find the least expensive mortgage lender.

Hope this helps,

Irina Karan
Beachfront Realty, Inc.
0 votes Thank Flag Link Fri May 11, 2012
CON-Whie it is true you do not have to make payments on the loan as long as you live in your home, if for any reason you become ill and have to move to an assisted living home for example the loan can become due and payable in full.

PRO-The funds are not taxable, and providing to are healthy enough to remain in your home, you do not have to make any payments.

Best of Luck to you!
Kawain Payne, Realtor
0 votes Thank Flag Link Thu May 10, 2012
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