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Moving Forward With Reverse Mortgages

05/09/06 - 07:25 AM EDT

Terry Savage

Let me stress again: No one can force you to sell the home while you still live there. Another important note: The repayment amount can never exceed the value of your home at the time the loan is repaid. You or your heirs can never owe more than the home is worth when you die or sell it.

There are federal limits on the total size of a reverse mortgage loan, based on where you live. Currently, the caps range from $200,160 to $362,790. There is a bill making its way through Congress that would create a single, higher, national limit.

If your home is worth more than the area lending limit for a traditional reverse mortgage, you can take out a "jumbo" reverse mortgage. In that case, you'll be required to draw down the entire borrowing and put it into a money market account or other investment instead of receiving a monthly check.

Seniors considering a reverse mortgage must have independent counseling, usually given by the AARP over the phone. That means you'll have plenty of chances to ask questions.

This kind of financial independence is priceless and well deserved. Why shouldn't your house pay you back for all the money you've put into it over the years -- especially with the guarantee that you can never lose the roof over your head?

So, if you're a senior -- or if you have parents who might benefit from more monthly income -- it's time to consider a reverse mortgage. And that's The Savage Truth.




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Terry Savage is an expert on personal finance and also appears as a commentator on national television on issues related to investing and the financial markets. Savage's personal finance column by the Chicago Sun-Times is nationally syndicated, and she released her fourth book, The Savage Number: How Much Money Do You Need? in June 2005. Savage also was the first woman trader on the Chicago Board Options Exchange and is a registered investment adviser for stocks and futures. A Phi Beta Kappa graduate of the University of Michigan, Savage currently serves as a director of the Chicago Mercantile Exchange Corp. She also has served on the boards of the McDonald's and Pennzoil corporations.

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