Reverse mortgages

Reverse mortgages deal with the equity out of your house and convert it to payments to you as a form of loan repayment for your house equity. The money that you receive in a reverse mortgage is usually not taxable, and usually it will not affect your Social Security or Medicare payments. It can be used for anything that you desire, including paying off debts, building a retirement fund or paying for home improvements. There is, however, one big problem with these loans; namely that they can become very expensive. Here are some tips to help you make sure that you don't become too addicted to them.First of all, before you even apply for reverse mortgages, you should talk to your tax advisor to see if you can qualify for a loan tax reduction. For people who own their homes outright, there is usually nothing that the government can do for you to get this reduced rate, but you may be able to get a loan deferment or installment agreement to lower your payments. With either option, though, you will need to have some equity built up in your home to make sure that the loan can be paid off, and you'll need to make your payments on time.Another important thing to keep in mind is that reverse mortgages may not be totally free from property taxes. In fact, the lender might insist on having you pay property taxes on the full face value of your loan, which could tack up a lot of money. The lender might also require you to pay insurance, servicing and redemption charges, as well as property appraisal costs. The lender might also foreclose on the house if you default on the loan.When you decide that you want to take advantage of a reverse mortgage loan, there are some things that you need to think about. Are you going to be able to afford to repay the loan? Is the amount that you borrow sufficient for your needs? And what will you be using your funds for? Do you need a lump sum to pay off debts? Or do you want some of the money to be used for savings or investments?Reverse mortgages come with variable interest rates. The interest rates may change over time. You should always shop around and compare the different lenders to see who has the best deal. Also shop around to see how much of your interest rates can be negated. Some lenders allow you to borrow only a fixed interest rate while others let you borrow against only some of your loan balance.Before you agree to sign any papers, read all of the documents and understand the terms of your reverse mortgages. Be sure that you know exactly what you will be doing with the money and what you'll be paying back each month. Your lender will have helpful calculators that will help you work out the numbers and to determine which option is best for you.To find a good counselor for your reverse mortgage, look in your local yellow pages under "reverse mortgage counselors". Or ask family and friends if they can recommend someone. Or shop around on the Internet. There are many websites that have lists of reputable and helpful reverse mortgage counselors.You should always carefully read the terms of your agreement before signing it. Understand how much of your loan can be negated and how much is subject to interest rates. Also keep in mind that although your reverse mortgages might have lower interest rates than regular loans, if you owe more on the loan than you earn, your payments will be substantially higher. So be realistic when you are choosing a lender for your reverse mortgage.

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