| Is Bankruptcy Better Than A Reverse Mortgage? |
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| Written by Josh Ramos |
| Saturday, 25 July 2009 13:10 |
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You should always think carefully before making a financial decision, and this is certainly true when it comes to decisions like bankruptcy. However, bankruptcy is not the only decision that has long-term effects. What about something like a reverse mortgage?
You should always think carefully before making a financial decision, and this is certainly true when it comes to decisions like bankruptcy. However, bankruptcy is not the only decision that has long-term effects. What about something like a reverse mortgage? Who qualifies for a reverse mortgage? If you are at least 62 years old and have home equity, then you qualify for a reverse mortgage. These are loans that are specifically meant for seniors with home equity. Let's say you own a $200,000 home, and you own it free and clear (which means you don't owe the bank anything anymore). You can borrow a certain percentage of the equity in your home, and that amount will be paid to you at a specified time such as on a monthly basis. You won't have to make any mortgage payments, and nothing has to be repaid until the senior citizens move or die. (You don't necessarily have to own the home free and clear, as some lenders will simply use whatever equity you may have.) You might think that this sounds like a great deal, but don't forget that the reverse mortgage has to be repaid at some point. If you don't repay the loan within your lifetime, then the lender will end up taking your house and leaving your children or other heirs with nothing. Of course, this might not be a big deal to you if you do not have any living relatives or if your immediate family members are doing quite well. You might need to use the money for your own needs, and you certainly have the right to do so. However, you should think carefully about the consequences including the possibility of a bank taking over your house at some point. Otherwise, you need to be very careful about this option. If you want to bequeath the house to someone you love, then that loan has to be repaid at some point. Also, you need to make sure that you're dealing with a good lender and not someone who pushes or tricks the elderly into making decisions that are not in their best interest. A reverse mortgage may also change how the government views your benefits like Social Security and Medicaid. The rules change from time to time, so you should look into this as well. What about bankruptcy as an option? We would never say that you should take bankruptcy lightly or jump into it without weighing your options carefully. However, if you have a significant amount of debt, bankruptcy may be better than getting a reverse mortgage. This could wipe out your debts without having to put your home on the line. This is especially significant if your debt comprises unsecured credit card debt because your home is usually safe from that kind of debt. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Don't let the fear of your debt take over your life. Get the facts about bankruptcy and learn how to get control of your debt. To learn more about life after bankruptcy visit us at http://personalbankruptcyquestions.org |