Which of the following is an advantage of a reverse mortgage?
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Get the latest tips you need to manage your money — delivered to you biweekly. LoadingSomething is loading. Thanks for signing up! Access your favorite topics in a personalized feed while you're on the go. download the app Email address By clicking ‘Sign up’, you agree to receive marketing emails from Insider as well as other partner offers and accept our Terms of Service and Privacy Policy. A reverse mortgage is a type of mortgage that lets you take equity out of your home. To get one, you have to be at least 62 years old and either own your home outright or have a low balance on your current mortgage. Reverse mortgages can be useful tools for seniors who want to stay in their homes and turn their home equity into cash they can use each month. But depending on your goals, there can be some pretty significant drawbacks to these types of mortgages. Mortgage CalculatorHome Price Down payment % Length of loan (years) Interest rate % $1,161 Your estimated monthly payment More details Chevron iconIt indicates an expandable section or menu, or sometimes previous / next navigation options. Total paid$418,177 Principal paid$275,520 Interest paid$42,657 Ways you can save:
How do reverse mortgages work?When you get a reverse mortgage, instead of paying a mortgage bill each month, the lender pays you. You can receive your reverse mortgage funds in the form of monthly payments, a lump sum, or a line of credit. The money you get comes out of your home, turning your equity into cash. Once you sell your home, move out, or die, the loan will need to be repaid — typically out of your estate or using the proceeds from the home sale. The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the US Department of Housing and Urban Development (HUD). Remember that a reverse mortgage is a loan, meaning you won't receive the funds from it for free. Lenders charge interest and fees on reverse mortgages. Often, these mortgages can be more expensive than other home loans, according to the Consumer Financial Protection Bureau. Pros and cons of reverse mortgagesPros
"While it may seem like you are earning 'income' from the mortgage, the IRS does not view it that way," says Levon L. Galstyan, a certified public accountant at Oak View Law Group. "You won't owe more taxes on April 15 since reverse mortgage payments are treated as loan proceeds, not taxable income." Cons
Alternatives to a reverse mortgageIf you're in need of extra funds but a reverse mortgage doesn't make sense for your situation, you might instead try:
Molly Grace Mortgage Reporter Molly Grace is a reporter at Insider. She covers mortgage rates, refinance rates, lender reviews, and homebuying articles for Personal Finance Insider. Before joining the Insider team, Molly was a blog writer for Rocket Companies, where she wrote educational articles about mortgages, homebuying, and homeownership. You can reach Molly at [email protected], or on Twitter @mollythegrace. Read more Read lessEditorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Read our editorial standards. Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available. What are the benefits of having a reverse mortgage?Pros of a reverse mortgage. You can better manage expenses in retirement. ... . You don't have to move. ... . You don't have to pay taxes on the income. ... . You're protected if the balance exceeds your home's value. ... . Your heirs have options. ... . You have to pay for it. ... . You can't deduct the interest from your taxes until you pay off the loan.. What are the advantages and disadvantages of a reverse mortgage?Reverse Mortgage Pros. Helps Secure Your Retirement. ... . You Can Stay in Your Home. ... . You'll Pay Off Your Existing Home Loan. ... . You Won't Have Tax Liability. ... . You're Protected If the Balance Exceeds Your Home's Value. ... . You Could Lose Your Home to Foreclosure. ... . Your Heirs Could Inherit Less. ... . It's Not Free.. What is the purpose of a reverse mortgage quizlet?A reverse mortgage allows a homeowner to convert the equity in the home they live in into cash payments. There are several requirements for obtaining this type of loan, but basically the you must be 62 years old or older and live in the home as your primary residence.
How does a reverse mortgage work quizlet?A loan based on the equity in a home, that provides elderly homeowners with tax-free income and is paid back with interest when the home is sold or the homeowner dies.
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