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To Buy Or Not To Buy A Home With A Reverse Mortgage

To Buy Or Not To Buy A Home With A Reverse Mortgage

Many homeowners are now looking to buy a home with a reverse
mortgage. Tremendous growth in the housing market over the last
few years has given many homeowners a considerable boast in
equity.

Take for instance, Doris and Robert who purchased their home 45
years ago for about $15,000. Now in their mid-seventies the
couple is pleased to discover that area home values have
skyrocketed and single family homes like theirs are currently
selling for a minimum of $150,000.

Doris and Robert like many other homeowners who originally
purchased their home for a modest price and have maintained the
same residence for a number of years are now retiring and finding
reverse mortgage value in their home equity.

Seeking a change, many of these homeowners are looking to buy a
home with a reverse mortgage. They are now thinking that the
equity they have built up could be used to finance a second home
in the country or a waterfront cottage.

While only a very small percent of mortgages are actually the
reverse type, reverse mortgages are gaining in popularity.
Federally insured since the late 1980’s, the reverse mortgage
allows mortgage-free homeowners to borrow against their equity.

Traditionally, homeowners only saw the disadvantages of a reverse
mortgage and regarded them as a last ditch effort to avoid
foreclosure, pay medical expenses in later years or to keep their
home in good repair. Today’s senior homeowners however are
turning to a reverse mortgage as a creative way to enhance their
retirement years.

A reverse mortgage now provides retiring couples with an
opportunity to enjoy the fruits of their labor. They have raised
their families, paid off their mortgage during their working
years and are now looking to enjoy a few luxuries. Further,
couples who never had an opportunity to travel can now do so by
dipping into their home equity.

When you buy a home with a reverse mortgage you are able to pay
cash for the second ‘vacation’ home while continuing to live in
your primary residence for as long as you wish or are able. Once
you die, your primary residence is usually sold to pay back your
reverse mortgage loan, while the second home becomes part of your
estate.

In order to buy a home with a reverse mortgage you also must be
age 62 or older. As a reverse mortgage borrower, you can opt to
receive a lump sum, a line of credit, or regular monthly
payments.

While this may seem like a win-win situation for the senior
homeowner, the borrower must beware. It’s important to proceed
with caution when dealing with what is quite possibly your single
largest asset.

Only after careful consideration should you buy a home with a
reverse mortgage. Reverse mortgages are not for everyone and
borrowing against your equity can quickly turn into a negative if
you don’t fully understand the advantages and disadvantages of a
reverse mortgage.

One of the major disadvantages of a reverse mortgage is that you
would not have the funds available should you or your spouse,
require long-term home or hospital care and all your money is
tied up in a reverse mortgage.

Despite the potential drawbacks, such mortgages programs are
allowing today’s seniors the opportunity to buy a home with a
reverse mortgage and enjoy the retirement they always dreamed of.

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