Using Your Reverse Mortgage For Protect Your Home Value

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Using your reverse mortgage to protect your home value.

Many consumers have misconceptions about these loans, often leading them to believe that these mortgages have too many drawbacks and should only be used for extreme financial hardship. Our articles addressing the myths about reverse mortgages debunk these misconceptions, however there are benefits to them that most consumers and even industry professionals are not aware of or have not considered, and at times drawbacks that have not been thought through as well. One such benefit is the tax planning options outlined earlier. Another is receiving protection from housing volatility. Yes, it 's actually possible to use a reverse mortgage to protect yourself in part from falling home …show more content…

Regardless of how much the home lost value, your heirs will never have to pay the shortfall if they choose to turn the home over to the lender. You still got your cash, and if you have cash left from the mortgage may leave that to your heirs.

On the flip side, if there is equity in your home and you wish to sell or refinance it you keep the equity, not the reverse mortgage lender. The same holds true for your heirs who may choose to refinance the home and keep it or sell it and get its equity if the home value is greater than the reverse mortgage payoff. In the vast majority of the time the home still has equity remaining when the borrower passes away. For more information explaining how the equity growth works see "what will happen to my equity"

So how much protection can you get? Well it 's not a full protection of home value, but it is a partial one. The loan 's size is determined by location, age of the borrower, and the value of the home. Only a certain percentage of the home value is lent. Assuming you borrow 60% of the home value the protection offered is that you won 't lose more than 40% of the home 's value at the time you take out the reverse mortgage. Basically the loan to value of your loan dictates how much protection you have.

So what conditions apply? First, if you owe more on the home than its worth and you wish to move you would have some issues to deal with. If the sale proceeds don 't cover the loan balance you will have no obligation to pay the

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