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Reverse mortgage explained again



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September 19, 2007
I am discussing this issue for the third time because I continue to get questions regarding this type of mortgage. Seniors should cut this article out and save it for future reference or to give it to someone they know that could benefit from a reverse mortgage.

Alex,

I am 80 years old and own a condo in Florida where we spend the winter. The monthly payments have been slowly rising due to tax increases. I can no longer afford the payments. I owe about $35,000 and it is worth about $70,000. I don't want to sell. What options do I have?

— C.B. Imlay City

C.B, A reverse mortgage is the answer to your problems. You may have to talk to a lender or bank in Florida to do this but inquire at some local banks here to see. To qualify for a reverse mortgage the deed holder to the home has to be 62 years or older and have equity in their home. A reverse mortgage is a loan that allows older homeowners to convert that equity into cash. Instead of you having to make monthly loan payments the bank will make cash payments to you and just increase your balance accordingly. Your balance would continue to rise as interest will continue to accrue however you would not be responsible to make any payments. You would keep the title on the condo and can continue to use it, all while collecting cash payments generated by the loan secured with the condo's equity. You can collect cash as you need it or not at all. Either way there is no payments due to the bank on the original $35,000 you currently owe or any cash you pull out until either you sell it or upon your death. Upon sale or your death the balance due is paid from the proceeds of the sale at that time. Since it is a mortgage it is not considered taxable income and does not affect your Social Security or Medicare benefits. You would still be responsible to pay the taxes, insurance, and condo dues however the monthly cash payment that a reverse mortgage will give you should cover those expenses. This is a way you can enjoy your condo without any out of pocket expense on your part. The downside to this mortgage is that your heirs will not inherit as much since the balance on the condo will be increasing. However, you earned your money and should not be forced to skimp on your quality of life in your last years. Get the reverse mortgage and enjoy the condo without any expense on your part. I am sure your children would rather have you enjoy your time left than for them to get a few thousand dollars extra upon your death. Just make sure you shop around to find a lender who is willing to do this for you and make sure they explain everything about this loan so you understand it fully.

Alex Lengemann is a licensed Real Estate Broker who operates RealtyVolution.com, a local real estate company. You can Ask Alex your real estate or mortgage questions by phone 810-664-1819 or by email Alex@RealtyVolution.com.

— ADV

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