Advantages Of Reverse Mortgages Loans

In a reverse mortgage you can then borrow against the cash value of your home.

When you buy a home, you traditionally borrow a large sum from a bank that you pay back, with interest, over so many years. In a reverse mortgage, say after you're retired and that home is now paid for, you can borrow against the value of that home.

When you retire, your income usually becomes much smaller than when you were working. You can then compensate for that lower income by taking out a reverse mortgage on your paid up home. Say your home is worth around $150,000. You decide to take out a reverse mortgage payment of $300 a month for as long as you live in that home, or even for as long as you live. Although this $300 is extra income for you, it is tax free, and won't affect your Social Security or Medicare benefits. Why? Because that money is considered a loan. When you leave the home, or die, the loan will come due. Now if the home sells for more than the loan, (in this case $150,000) the extra money will go to your beneficiaries. If it sells for less, the bank takes the loss. They can not go after your heirs for the difference. It's a win win situation all the way around. You get a lifelong, tax free income, while still living in the home the entire time, and you don't straddle your heirs with a financial burden.

Of course, lenders won't give a mortgage for 100 percent of its worth. Usually, 50 to 75 percent. But the older you are, the more they will lend, since the odds are that you won't live long enough to collect more than the home is worth. And there are fees and costs, which you can roll into the loan itself, so they're settled when the loan comes due.

Check with your bank about their policy on reverse mortgages, and to find out further details. But a reverse mortgage is a viable option for extra, tax free income.

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