Consider a reverse mortgage
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, reverse mortgage February 21st, 2008Retirees short on savings can benefit from these complicated loan products where the bank pays you.
NEW YORK (CNNMoney.com) — Mortgage payments sucking you dry? Boomers short on retirement savings may have another option: reverse mortgages. Can these complicated products fill the gap?
Know the process
Reverse mortgages are exactly that. Instead of paying the bank, the bank pays you. It’s a type of loan where your equity is converted into cash.
These mortgages are designed for people 62 and older. And you can get this cash in a few ways: Either you can get it all in a lump sum, a monthly payment or a line of credit that you can tap into when you need it.
The loan doesn’t need to be repaid if you continue to live in the home. But if you move, the debt must be repaid - with interest. If you die, your heirs can elect to sell the house to repay the loan.
While the payment doesn’t usually affect social security or Medicare, it may affect Medicaid according to Peter Bell of the National Reverse Mortgage Association.
You will also be responsible for property taxes and any repairs on the home.
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
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The older you are…
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