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This means that you, or your estate, can’t owe more than the value of your home when the loan becomes due and the home is sold. Most reverse mortgages have something called a “non-recourse” clause.
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You are still responsible for maintaining your home. The “set-aside” reduces the amount of funds you can get in payments. As a result, your lender may require a “set-aside” amount to pay your taxes and insurance during the loan. A financial assessment is required when you apply for the mortgage. And, if you don’t pay your property taxes, keep homeowner’s insurance, or maintain your home, the lender might require you to repay your loan. That means you are responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. In a reverse mortgage, you keep the title to your home. You have to pay other costs related to your home.Interest on reverse mortgages is not deductible on income tax returns – until the loan is paid off, either partially or in full. Interest is not tax deductible each year.Often, the total amount you can borrow is less than you could get with a variable rate loan. Some reverse mortgages – mostly HECMs – offer fixed rates, but they tend to require you to take your loan as a lump sum at closing. Variable rate loans tend to give you more options on how you get your money through the reverse mortgage. Most reverse mortgages have variable rates, which are tied to a financial index and change with the market. That means the amount you owe grows as the interest on your loan adds up over time. As you get money through your reverse mortgage, interest is added onto the balance you owe each month. Some also charge mortgage insurance premiums (for federally-insured HECMs). Reverse mortgage lenders generally charge an origination fee and other closing costs, as well as servicing fees over the life of the mortgage. Here are some things to consider about reverse mortgages: In certain situations, a non-borrowing spouse may be able to remain in the home. When the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence, the loan has to be repaid. The money you get usually is not taxable, and it generally won’t affect your Social Security or Medicare benefits. Instead of paying monthly mortgage payments, though, you get an advance on part of your home equity. If you get a reverse mortgage of any kind, you get a loan in which you borrow against the equity in your home. There are three kinds of reverse mortgages: single purpose reverse mortgages – offered by some state and local government agencies, as well as non-profits proprietary reverse mortgages – private loans and federally-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs). Sometimes that means selling the home to get money to repay the loan. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Generally, you don’t have to pay back the money for as long as you live in your home. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. In a reverse mortgage, you get a loan in which the lender pays you.
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When you have a regular mortgage, you pay the lender every month to buy your home over time. Be Wary of Sales Pitches for a Reverse Mortgage.