Mortgageclassic
Getting the best mortgage for you

• 2 August 2010

A reverse mortgage is a special type of loan that home owners can sometimes get to convert the equity in their homes to cash. Basically, a reverse mortgage is a type of loan that provides you with a monthly income, a lump sum of cash, or a line of credit.

This reverse mortgage concept was for retirees keen in keeping their homes but whose incomes aren’t sufficient to support their lifestyle, and is used to help people on low incomes to pay for daily expenses, huge medical bills or the odd house maintenance and repair costs. Reverse mortgage also pays off your existing loan, if you have any.

Reverse mortgages appeal to older adults because of the lump sum loan advances, which are not taxable. It does not generally affect your Social Security or Medicare benefits. Another advantage of reverse mortgages is the different withdrawal options that you can choose from. These options include lump sum pay outs, line of credit, monthly payments, or any combination of these three. So if you were eligible to borrow $250,000 on a reverse mortgage you could select to receive $75,000 up front to cover current expenses, and hold the rest as a line of credit that you can use whenever you need it. This flexibility of reverse mortgages can significantly improve you financial independence during retirement

The disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a traditional mortgage. This is due to the rising-debt nature of the reverse mortgage concept. Another disadvantage is the payments from a reverse mortgage loan can can affect the eligibility for old age pensions, or supplemental Social Security income.

Considering these facts, reverse mortgage are definitely an option to look up to if you are looking for ways to supplement your current income. As with any financial decision, sought advice from trained and licensed financial professional to analyze and determine if a reverse mortgage is right for in your unique circumstances.

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• Filed under
  • Mortgage Types
• Tags:
  • Financial Decision,
  • Financial Independence,
  • Flexibility,
  • Incomes,
  • Loan Advances,
  • Lump Sum,
  • Medical Bills,
  • Medicare,
  • Medicare Benefits,
  • Mortgage Select,
  • Old Age Pensions,
  • Older Adults,
  • Reverse Mortgage Loan,
  • Reverse Mortgages,
  • Social Security,
  • Social Security Income,
  • Supplemental Social Security,
  • Supplemental Social Security Income,
  • Traditional Mortgage,
  • Withdrawal Options
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