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Reverse Mortgages

If you own your home and are or expect to be short on cash in the coming years, a reverse mortgage is a great way to get access to the wealth you've tied up in your home without having to move out.

As the name implies, a reverse mortgage is the opposite of a conventional home loan. Unlike a regular mortgage, with a reverse mortgage the bank pays the homeowner. The most frequently used reverse mortgage, called a home equity conversion mortgage, is similar to a home equity loan but targeted for those 62 years or older. A homeowner borrows money from a bank at a determined rate and receives the amount of the loan either as a single lump sum, a pre-negotiated line of credit, or in payments over the life of the reverse mortgage. When the homeowner sells the house or dies, the outstanding balance and interest charges of the reverse mortgage are paid with the proceeds from the sale of the house.

When used to pay amounts monthly to a homeowner, a reverse mortgage allows people to continue to live rent free in their home while tapping the accumulated savings in their home to pay living expenses. The additional income can make an enormous difference to the elderly by providing additional income to pay health care costs or to hire home care attendants. The availability of an immediate line of credit to meet sudden and unexpected emergencies can bring piece of mind and return an important measure of control. And in addition to making savings available as they are needed, a reverse mortgage still allows homeowners to reap the benefits of any increase in value of their home through continued home ownership.

When shopping for a reverse mortgage, look for the same features you would in a conventional home loan. Find a loan with the right period over which

you will receive payments, pick an amount that you will be comfortable with withdrawing from the value of your home, and, of course, get the best interest rate available after taking into account any fees and transaction costs.

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