You may have seen Reverse Mortgages advertised on television or heard about them on radio. These mortgages are aimed at homeowners who are 62 years of age or older who are looking for additional sources of money with which to pay for home improvements or help offset medical expenses.
A reverse mortgage allows a homeowner to convert part of the equity in the home into cash without having to sell the property. Rather than the homeowner making a mortgage payment, the lender makes a payment to the homeowner each month. You normally don't have to repay the money as long as you continue to live in your home. The loan is repaid when you die or sell your home. These funds are generally tax-free.
If you qualify for a reverse mortgage and are considering one, here are some facts you should know.
- You will probably be charged origination fees and other closing costs for a reverse mortgage. You may incur service charges during the term of the loan. Your lender will set these fees and costs.
- The amount you owe on a reverse mortgage continually increases. Interest is charged and continues to accrue for the life of the loan.
- Many reverse mortgages come with variable interest rates. This means they can change according to the market conditions.
- Reverse mortgages can end up taking all of the equity out of your home. This leaves fewer assets for you and your heirs.
- You still retain the title to your property which means you are responsible for property taxes, insurance, utilities and any other expenses.
- Interest on reverse mortgages is generally not deductible on your income tax returns.