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Everything You Need To Know About Reverse Mortgages
If you’re 62 years or older, own at least 50% of the equity in your home, and plan to stay there for many years, a reverse mortgage may be a good option for you. Reverse mortgages provide funds to homeowners, stopping monthly payments until the owner leaves the property, but can add interest, making it easy to overspend and be left with a large payment.
Retirees face big changes in their income, so reverse mortgages help to bring some more cash flow to your monthly budget and lock in the equity in your home until you sell it. You can also borrow against the value of your home without worrying about the monthly repayments in the short-term.
Those who benefit the most from reverse mortgages are retirees in good health with a good amount of equity, as you can make payments in the overall balance but are not required to fully pay it back until you leave the property. Be careful when considering living with other family members or getting married, as this can affect your family’s ability to own the property later.
There is a significant amount of risk involved in this process, and it includes a number of costs, such as origination fees up to $6,000, an upfront mortgage insurance premium of as much as 3% of your loan, and a 0.5% premium each year. Your heirs can then choose to keep, sell, or forfeit the property depending on its overall value.