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Reverse Mortgage: Home Loan for Seniors (3)

Make sure to note the difference between this kind of mortgage and the "regular" kind. A reverse mortgage is the opposite of a forward mortgage, which is the typical home loan that requires a payment on the principal amount each month plus interest. As you make your monthly payments on regular home loans, your equity in the home goes up while debt goes down (decreasing debt and increasing equity). However, with reverse mortgages, you get cash (that's the loan) but you do not make monthly payments, so your debts increase. Hence, reverse mortgages can be described as rising debt and falling equity.
One must plan carefully; using a reverse mortgage means that home equity can theoretically drop to a low value, unless the property value keeps appreciating to offset this equity decrease. Deciding whether you are a good candidate for a reverse mortgage depends partly on these factors (your current home equity and the average/current rate of home appreciation), and partly on others (your age, other debts, how much you plan to receive each month, and how you plan to use the "income" you will receive via the reverse mortgage loan).








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