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Reverse morgage

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Brownsfan2k5
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Reverse morgage  Reply with quote  

Can someone explain a reverse morgage to me?
Post Thu Jul 04, 2013 6:35 pm
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oldguy
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People that are over age 62 with a paid-for (or nearly paid-for) can get a cash loan for about 50% of the house value. But you make no payments on the loan, it acrues interest to the lender over the years until you die (or move/sell). And then the lender sells the house and collects the loan principal and his the accrued interest. If there is any overage it goes to your estate, if there is a shortfall, your estate is not charged.

The interest rate is about 6.5% to 7%. So if you accepted a $150,000 cash loan on a $300,000 house - and lived 20 years, there would be an $580,000 debit against the house, ie, the entire house would probably go to the lender and none to your heirs.

Geneally speaking - it's not a good plan (IMO). w/ a paid-for house I would rather get a normal 30 yr "forward mortgage" at about 4%, make the payments, and use the cash loan to pay the 4% plus other things.
Post Thu Jul 04, 2013 9:30 pm
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clydewolf
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quote:
Originally posted by oldguy
there would be an $580,000 debit against the house, ie, the entire house would probably go to the lender and none to your heirs.



The heirs could buy the house if they wanted.

In a reverse mortgage you are still responsible for taxes and insurance on the home. But you can get some of your home equity into your hands for your use today.

You also can pay off the mortgage when you have sufficient assets to do so.

Here is more about Reverse Mortgages:
- http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/rmtopten
- http://www.aarp.org/money/credit-loans-debt/reverse_mortgages/
Post Fri Jul 05, 2013 3:59 pm
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naina8888
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Thanks for this discussion. I was not aware with the reverse mortgage concept. Now I have learned it and I can explain this to other who would like to reverse mortgage.
Post Sun Aug 11, 2013 6:37 am
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