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Lombard estate planning lawyerRecently, a previous post on this blog discussed the definition and some of the possible benefits of reverse mortgages. In that article, we talked about how reverse mortgages are often taken out by seniors to supplement their retirement income by borrowing against the equity they have built in their homes. In many situations, a reverse mortgage may be an appropriate option, but it is important to consider that reverse mortgages could also have some disadvantages—including an impact on the assets passed down to a person’s heirs.

Unforeseen Costs

The entire point of a reverse mortgage is to give an elderly person—62 is the minimum qualifying age—access to additional money during his or her lifetime. The amount a person can borrow in reverse mortgage is dependent on a number of factors including the type of reverse mortgage, the borrower’s age, the value of the home, and interest rates. Of course, in most cases, the lender will also apply a number of costs and fees, including an origination fee, costs at closing, and servicing fees for the life of the loan. Some lenders also charge for mortgage insurance premiums for certain reverse mortgages.

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Lombard estate planning lawyersIf you watch television at certain times of the day, you are likely to see occasional advertisements for reverse mortgages. These ads often run in similar timeslots as commercials for arthritis medication and electric scooters. It is clear that they are intended to reach a certain demographic—namely, seniors who are starting to consider the reality that they will not live forever. As with most television pitches, it understandable that the audience would be skeptical, but a reverse mortgage may be an option for certain individuals and families.

Reverse Mortgages Defined

Most people understand that a standard mortgage is a financial arrangement in which a lender provides a borrower with money to buy real estate, including a home. The property itself is the collateral used to secure the loan. The borrower makes regular installment payments until the amount borrowed and any accumulated interest is repaid.

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