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Reverse Mortgages February 23, 2006

Ken Terrill, President, with a Primer on . .
Reverse Mortgages


Older homeowners are realizing they can take advantage of the equity in their homes without selling or moving from the house

Older homeowners are realizing they can take advantage of the equity in their homes without selling or moving from the house.  A reverse mortgage provides a way to convert home equity into additional monthly income, a line of credit or a lump-sum payment to the homeowner without ever giving up title to the home and without incurring mortgage payments.


A senior homeowner can use funds from a reverse mortgage to supplement their monthly retirement income through the purchase of annuity products, pay for long-term care insurance, even gift money to their heirs and the funds are tax-free.


"As many seniors approach retirement, they begin to realize their major asset is likely to be their house.  By the time the average person retires, they own a home that is usually worth more than they paid for it. It is pretty amazing that a senior can receive income from their home and not make monthly payments to a mortgage lender. A reverse mortgage is not new debt.  Rather, it is a repositioning of assets so seniors can live life more comfortably and fulfill some of their needs and desires."


How does a Reverse Mortgage work?


The Reverse Mortgage is a simple concept.  A senior enters into a contract with a lender that resembles a line of credit. The senior can draw funds for any purpose up to the maximum available.  An alternative is the guaranteed monthly payment. The guaranteed payment works like an annuity.  The monthly payment is guaranteed as long as the senior lives, even if that is far beyond their normal life expectancy.


What happens when you're gone?


Upon the demise of the Senior their heirs have choices. Refinance and keep the property. Sell the property to pay off the mortgage. Either way any remaining equity belongs to the Heirs.  If the senior owes more than the property is worth the lender will accept the property in full satisfaction of the debt.  No liability to their estate. If a disadvantage exists, it is that Seniors are spending their Kids inheritances.   It's your money, why not enjoy it?





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