In the times within which we are living, retirement planning can involve some uncertain projections because you simply cannot predict the future. You can follow trends closely and adjust along the way, but there are factors that are out of the control of the individual. A clear example is the impact that the recent sub-prime crisis and resultant Wall Street debacle has had on so many retirement plans. Very few people saw that economic tsunami coming, and it took its toll. But the American population is nothing, if not resilient, and the lesson has been learned.
The key is to be able to improvise and know your options. With this in mind, if you were to find that you needed some liquidity during your retirement years, a reverse mortgage is something that you may want to consider. As the name of the loan implies, with a reverse mortgage the tables are turned. Rather than you as the borrower paying the lender to build equity in your home, the lender makes payments to you and receives equity in your property in return.
Since you are not the one making the payments there are no income or credit qualifications, and you can’t default so you can’t be foreclosed upon. You just need to be at least 62 years old and either own the home outright or have sufficient equity in it. The only real risk is that you must live in the home as your primary residence, keep it in reasonably good condition and pay the taxes and insurance. If you fail to meet any of these requirements the loan can be called in and your payments will stop.
When you die or choose to move from the home the mortgage becomes due. You or your heirs can then sell the house, pay the mortgage, and keep the remainder. However, you can pay off the loan using some other source of funding and keep the home if you choose to do so.
Larry Parman
Founding Attorney
Since founding Parman & Easterday in 1985, Larry has led over 1,000 free, community-service education programs and helped more than 10,000 Oklahoma families go from putting off their estate plan to getting it done. His goal for every client is the same: to become the person their family calls "the one who took care of everything."
Larry is the author of three books: The Straight Shooter's Guide to Estate Planning; Estate Planning Basics; and Guiding Those Left Behind in Oklahoma. He served as Oklahoma's Secretary of State and Secretary of Commerce, and his firm is the only member of the American Academy of Estate Planning Attorneys in the state.
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