Reverse Mortgages: Know Before You Owe —

Are you or someone you know considering getting
a reverse mortgage? A reverse mortgage is a type of loan for homeowners
aged 62 and older often used to help pay for living expenses. Here’s how they work. With a reverse mortgage, you borrow money
against the equity in your home. Instead of paying interest and fees each month,
they are added to your loan balance. As the loan balance grows, your home equity
shrinks. Once the last borrower no longer lives in
the house, the loan must be paid back, but you will pay no more than the value of the
house. Keep in mind that You can lose your home if
you don’t meet the loan requirements. Unlike a traditional mortgage, you have no
monthly mortgage payments. But you are still responsible for paying your
property taxes & homeowner’s insurance, and maintaining your home. If you can’t pay these expenses, or if you
stop living in your home for most of the year, you can lose your home to foreclosure. A reverse mortgage is not a government benefit. The loan is made by a private lender and it
must be paid back. You’ll need a plan for your future. Think about your future housing and financial
needs. On average, a 65 year old is likely to live
another twenty years or more. Down the road, you may want to live in a smaller
house or move closer to family. If so, a reverse mortgage may not be right
for you because you’ll need to pay off that growing loan balance when you sell your home and may not have enough left to buy a new home. Also, borrowing a reverse mortgage at a young
age can be risky. Later in life you’re more likely to have
less income and higher health care bills, which could be a problem if you run out of
loan proceeds. To learn how reverse mortgages work, and whether
they are the right option for you, check out our reverse mortgage discussion guide.

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