How to Profit From Reverse Mortgages

Reverse Mortgages are loans which individuals over the age of 62 can take out against the equity of their home. Rather than making payments to the lender, the borrower is entitled to payments – monthly, lump sum, line of credit, or even a combination of two or all. With that money, the homeowner can pursue whatever he or she wants, such as paying for health care, buying necessities or simply investing in securities. Despite it being reversed, it is still considered a loan, which will need to be paid back, either through periodic payments or upon death, where the lender has the right for the possession of the home. There are various types of reverse mortgages on offer and one can somewhat benefit from the overall deal as it is federally insured.

Instructions

  • 1

    Although the profit criteria varies, depending on the homeowner’s purpose, essentially reverse mortgages provides elderly people a significant financial cushion after retirement. As they are federally backed, it gives seniors considerable protection.  With the money, they can easily pay the current mortgage, make investments or simply free up money for day-to-day transactions.

  • 2

    A reverse mortgage is not taxable income, because it does not fall into the taxable bracket as defined by the IRS. While these usually come at a fixed-rate of interest, one can further pursue the option of variable interest rates and realize gains, if the market condition permits.

  • 3

    Reverse mortgages are not due payable until the occupants leave their permanent residence. This gives them the benefit of occupying their home as long as they wish, without having to worry about loan payments. However, in case individuals decide to move out, they will be entitled to pay the lender. Nonetheless, the payment can be structured according to their needs, where they can choose from a variety of options - monthly payments, lump sum, combination, etc.

  • 4

    The qualification criteria for reverse mortgages is somewhat straight forward, where individuals simply need to provide proof about their residence. Although credit score may come into play when deciding the actual worth of your home, it does not affect your eligibility in terms of qualifying for reverse mortgages.

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