I meet with baby boomers that own a home and are seriously considering getting a reverse mortgage or at the very least, are curious about them. ”Is this the most suitable option for me and my spouse?” Can my home get foreclosed on with a reverse mortgage? Whose property is it truly after I get a reverse mortgage? Those are some of the most frequent thoughts that I hear, There are all kinds of good and bad points in every decision. Making a decision about a reverse mortgage is no different. So here are a few things that may help you if you are seeking details on Reverse Mortgages:
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Benefits of Reverse Mortgages: (also called HECM – heck-uhm)
More cash flow guaranteed by the Federal Government which continues provided that your home is your primary residence. You can learn more about reverse mortgage optionsĀ here.
You can change your plan at any time from a line of credit, cash out, monthly checks, or a combo (based on what remains). The unused portion of the Line of credit increases on a monthly basis at 1.25% over the current interest rates. This is a way for many seniors to be able to remain in their home and be able to pay for care for themselves and the property.
Relocating might cause psychological problems for a lot of elderly home owners. Memories were made in your “home sweet home”, and close proximity to loved ones and residing in your town could be a good choice.
Get rid of your monthly mortgage payment and pay off those stubborn credit cards and other debt. Commonly, the only out of pocket expenses you will have are the HUD counseling fee and the appraisal. But other costs may apply depending on the situation and type of property.
You can not be evicted from your home as long as you are abiding by the agreement in the contract. Mainly these agreements include maintaining your home and paying your taxes, insurance and HOA dues.
You are able to refinance your Reverse Mortgage again and again so long as there is remaining equity in your home.
You can’t ever owe any more than the property is valued at.
This is what is known as a non-recourse loan. This means that, you have no personal responsibility for this loan, neither does your estate or your heirs.
There are several awesome options with this mortgage like the fees are limited and interest rates are capped.
Beneficiaries may get a tax break once the house is sold and the interest is all paid at once.
Your beneficiaries might be able to claim the interest from your mortgage on their income taxes after your passing away. (Be sure to consult your tax advisor for guidance.)
Everybody likes the good stuff or the pros. Super simple, no? Now, I am sure you think that this is where I am going to stop. Fortunately for you I am going to share some of the bad things about reverse mortgages. Here are the cons:
The Negatives of Reverse Mortgages:
They can and quite often are higher priced than a traditional loan. However, you can not really compare them as they are different loan products.
If whatever you are leaving for an inheritance is your home, there may or may not be equity for you to leave behind. Because you do not make payments with a reverse mortgage, you loan balance grows over time. As you loan balance grows it slowly eats up your equity. It is the complete opposite of a typical home loan where equity increases as mortgage payments are made.
You will typically net more money from the sale of your house than you will with a reverse mortgage.
These loans really don’t make sense if you are intending on moving in the future.
If you do not pay your taxes or insurance the lender may foreclose on your house.
The lending company can also begin the foreclosure process if you haven’t resided in the home for 12 consecutive months.
Medicaid could be affected, and you may not qualify for benefits unless you spend down your Reverse Mortgage proceeds monthly. (Check with your attorney and Medicaid for info.)
When NOT to get a Reverse Mortgage:
An equity loan are often much less expensive way of getting cash out of your home.
{When your major objective is improving your home, a community loan may work far better.|For those who only need to add a roof, windows or other energy efficient options. If that is the case, funds and assistance might be available. Go here for more reverse mortgage information.
If you are ill and assisted living or a nursing home is coming up, you should not choose a Reverse Mortgage.
If family members suggest that a senior reverse mortgage is not a good option, take into consideration their recommendations and keep an open mind; they’ve got your best interests at heart.
If your kids ask you to move in with them, this can be a wonderful option to staying in your own home.
A home-owner whose residence uses in excess of 25% of the total livable space for their home business is not going to be eligible for an FHA Reverse Mortgage.