CNBC: Use Home Equity as Nest Egg for Retirement

In these tough economic times, many retirees are looking for ways to guarantee income in their later years, and getting a reverse mortgage is one possibility, says a recent CNBC article.

As the name implies, such loans work in the reverse order from a typical mortgage, in that you receive a monthly check from your lender based on the amount of equity you own.

There are generally no income restrictions for eligibility, and according to the Federal Trade Commission, the proceeds from your home are tax-free and do not affect your Social Security or Medicare benefits.

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Better still, you do not have to repay the loan as long as you live in your home, though it must be repaid when the last surviving borrower dies, sells the home or no longer uses it as a primary residence,” reads the CNBC article.

The loans aren’t for everyone, though, the article quotes a financial expert as saying. Instead, they can be a good option for homeowners who are “cash poor and house rich,” but not necessarily for those looking to tap into their equity for nonessential expenses.

Upfront costs of taking out a home equity conversion mortgage (HECM) are also mentioned, with the financial expert recommending prospective borrowers to “shop around” for lenders offering the best deals as far as origination fees.

Reverse mortgages are named alongside annuities, dividend stocks, and Treasury-inflation protected securities (TIPs) as options for “converting a nest egg into a predictable source of income.”

Read the original CNBC article here.

Written by Alyssa Gerace

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  • Mr. Collins, the
    so called financial expert, seems to know every little about the product making
    statements like: “Reverse mortgages are sold by both private lenders and the
    federal government….”  Going on to
    say:  “‘I’ve seen loans where you might
    pay $15,000 to borrow 50 percent of a $100,000 home,’ says Collins, noting
    homeowners should realistically look to pay anywhere from $3,000 to $5,000 for
    a HECM.”  What can you say to this? 

     

    What was interesting was the section on reverse mortgages
    was not hidden at the back of the article or somewhere in the middle but was
    the first financial instrument mentioned.

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