If you are thinking about getting a reverse mortgage, you more than like likely have a ton of questions. Should I or shouldn’t I get a reverse mortgage? Can the federal government take my property? Who’s on title to the property when you invest in a reverse mortgage? Those are probably the most typical questions that I hear, With many choices in life, you need to determine what makes the most sense. This is also true with a reverse mortgage loan. In order to aid you in your fact gathering journey I have included a huge amount of information for you.
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The PROS of Reverse Mortgages: (also called HECM – heck-uhm)
Increase your monthly cash flow for life or for a specified term. You can learn more about your options with a reverse mortgageĀ here.
As long as there is equity in the house, based on your initial qualifications and growth, you could make changes to the way you access the homes equity. One of several fantastic features in regards to the line of credit it that the unused part of credit line grows at the current rate plus 1.25%. 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 emotional problems for a lot of senior homeowners. Memories were created inside your “home sweet home”, and close proximity to loved ones and remaining in your community might be a good choice.
Get rid of your monthly mortgage payment and pay off those stubborn credit cards and other debt. There isn’t any out of pocket costs besides the appraisal fee and HUD counseling. Some HUD counseling organizations will waive the fee.
You’ll be able to live in your home regardless of what is owed on your Reverse Mortgage. You can never be forced out of your home so long as your real-estate taxes and homeowner’s insurance are paid and as long as you maintain your home.
You can refinance out of the reverse mortgage in to a traditional loan presuming you are eligible and there is equity in your home.
Neither you, your estate or your heirs can ever owe any more than the value of the home.
This is what known as a non-recourse loan. Put simply, you have no personal responsibility for this loan, neither does your estate or your heirs.
There are lots of nice features with this mortgage like the loan fees are limited and interest rates are capped.
Can be a financial tool to help heirs avoid some of the real estate tax.
Your heirs 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 information.)
Now, those are the pros. Pretty easy, right? 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:
A Reverse Mortgage includes all of the common settlement costs you find with a standard mortgage loan. However, they may be more costly. There’s FHA mortgage insurance and additional settlement costs, but those expenses are typical of any FHA mortgage.
You might not leave much if anything for your heirs with a reverse mortgage. 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 mortgage loan where equity will increase as mortgage payments are paid.
Selling your property can often provide a larger return on your investment than a Reverse Mortgage.
These loans really don’t make sense if you are intending on moving in the future.
If you don’t pay your real estate taxes or homeowner’s insurance or fail to maintain your home, the mortgage company might call for repayment of the debt. (Financial institutions, however, will certainly work with you to cure the default.)
The bank can also begin the foreclosure process if you have not lived in the home for 12 straight months.
Medicaid might be affected, and you may not qualify for benefits unless of course you spend down your Reverse Mortgage proceeds every month. (Seek advice from your attorney and Medicaid for info.)
When NOT to get a Reverse Mortgage:
If you just need short-term access to cash and equity.
{In the event your major intention is repairing your home, a community gift may work better.|In the event you only need to add a roof, windows or other energy efficient options. If that is the case, funds and assistance may be available. Go here for more reverse mortgage information.
Once you know you are going to be moving to an assisted living facility in the very near future.
If family and friends believe that a senior reverse mortgage isn’t really a great option, consider their suggestions and keep an objective balance; they’ve got your best needs at heart.
For those who have other options such as moving in with relatives and buddies or the ability to pay for senior living facilities.
If you use the home for farming.