Tuesday, August 9, 2011

alternative living - part 4

Previously I posted about retirement planning and lowering cost of living options.  Here is a further look into another one of the alternative living arrangements to lower the cost of living:  reverse mortgages.

Here are the pros and cons to reverse mortgages:
-you can still live in the home that you have bought
-you still own the home
-you have a set amount of income every month in addition to your other retirement benefits
-you can mortgage part or all of the equity of your home
- the bank owns a part of your home because they are paying you for it
- depending on what portion and how you mortgage, it may run out
- depending on your mortgage and home equity, you may not leave much or anything to your heirs
- you still have to pay property tax, and other home owners expenses
- there are quite a few restrictions on setting it up, like if you get one through HUD, you have to be 62 or older and not have defaulted on any loans
-your house has to be paid off or very low balance

The drawbacks of reverse mortgage are many.  For one, you may not have much to leave your heirs.  Since this is relatively new product that got a bad rep due to sleazy sales people taking advantage of the elderly, many people distrust reverse mortgages.  Rightly so, since there is little regulation of this.  Banks are also stopping the offer of these while home values are sliding lower still.

However, for those who Social Security, an other retirement funds are not enough to live on, and they cannot live with the alternative means that i have mention in my previous posts, reverse mortgage could be a great way to supplement retirement income.  The catch is to be diligent in reading all contracts and understanding the fees and loan structure before signing anything. 

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