Deriving Income from Your Home Mortgage

Is a considerable amount of your net worth tied up in your home mortgage? Are you looking for a new source of passive income? And are you 62 or older? If the answer to all three of these questions is yes, you may be a candidate for a reverse mortgage. When you take out a reverse mortgage, a lender makes home mortgage payments to you against the value invested in your house. You may choose to get the value of your property in monthly payments or in a lump sum. You are allowed to remain in your house until you move away, enter a retirement community or nursing home, or pass on.
If I get a reverse mortgage, will it cancel my existing home mortgage?
No, but the proceeds of the reverse mortgage will pay off the remainder of your home mortgage. In some areas, homeowners are not allowed to have both a regular home mortgage and a reverse mortgage on the same piece of property. If you live in one of those areas, you will be required to put your reverse mortgage payments toward your home mortgage, and will not be able to use the income for other purposes until your mortgage is paid off.
If I take out a reverse mortgage on my house, can I still leave the house to my heirs?
Yes. Your heirs may repay the value of the reverse mortgage, attempt to sell the house to cover the cost of the reverse mortgage, or let the bank or other lender resell the house itself. Your heirs may need to take out a new home mortgage on the property to cover the cost of the reverse mortgage. As you can see, although it is possible to keep the property in the family, the extra expense of a reverse mortgage makes it strongly unlikely that your heirs will choose to redeem the reverse mortgage and keep the property in the family. You should consider a reverse mortgage only if you are not interested in having your heirs live in your house after your death.
What happens if the lender finishes making all the loan payments during my lifetime?
If the lender completes the full series of reverse mortgage payments while you are still alive and living in the house (that is, if you receive the full value of the house), you do not need to relinquish your house to the lender and move out. Because a reverse mortgage guarantees you the right of tenancy during your lifetime, you may live in the house as long as you like, without any obligation to return any part of the money to the lender. This will not affect the amount you, your estate, or your heirs owe when the house is sold; you cannot go into debt because of a reverse mortgage. This is one of several points that makes reverse mortgages more attractive than a regular home mortgage.

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by: marciafreeman
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