- What is a Reverse Mortgage?
- Are interest Rates Fixes or Variable?
- What are the pro's and con's of Reverse Mortgages?
A reverse mortgage is a home loan that you do not have to pay back for as long as you live in your home. It can be paid to you in a lump sum, as a regular monthly income, or at the times and amounts that you want. The loan and interest are repaid only when you sell your home, permanently move away or die.
Most reverse mortgages have a variable interest rate, based on the Treasury bill, or the LIBOR rate. Some new reverse mortgages will have the option for a fixed rate, this will be available in the future. A reverse mortgage is a way to access your homes equity and turn that equity into cash. The best part is that you do not have to make payments to repay the loan.
Pro's
- No payments
- No income qualification
- Flexibility in payments
- Payments tax free (consult your tax advisor) -
- Retained home equity may still appreciate
- Your heirs will never be liable for the loan
- You can stay in your home, as long as you pay insurance and maintain the home
- You can pay off existing debt and improve your cash flow
- You can use the funds for just about everything
- You retain the title to your home -Reverse mortgage can be integrated with other assets to enhance tax effectiveness (consult your tax advisor)
Con's
- Upfront costs may be higher than traditional loans
- Should not do a reverse mortgage if you plan on selling your home in 5yrs or less
- Should not do a reverse mortgage if your health is a concern
- Home equity can reduce over time
- May leave less assets to heir's
