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Chapter 8. Planning for the Home > Reverse Mortgages

Reverse Mortgages

A Reverse Mortgage is the name for a loan that uses your home as security for the loan, just like the conventional mortgage arrangement with which you are familiar. However, with a Reverse Mortgage you do not have to pay back the loan for as long as you live in the home. This allows people to take the equity out of their home and turn it into cash to meet their daily needs without having to be concerned about monthly payments. Repayment of the loan with interest is generally done at the earliest of the following: the borrower selling the home, moving out of the home or dying. With some Reverse Mortgages, however, the total loan with interest is due after a specific number of years.

Perhaps the greatest advantage to a Reverse Mortgage is that you, the homeowner, continue to control your home while gaining access to the home’s equity. If you had sold your home to get at the equity, you would have faced the difficult decision of how to invest the proceeds of the sale and would have had to find a new place to live. In addition, by using a Reverse Mortgage you bypass capital gains tax issues.


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