If you are thinking about getting a reverse mortgage, you more than like likely have a ton of questions. Will it be a bad idea or a wise course of action to secure a reverse mortgage loan? Can the government take my house? Who’s on title to the property when you are getting a reverse mortgage? Those are all excellent questions and supply a place to begin to learn more about this loan. Other areas of life have advantages and drawbacks. Reverse Mortgages are no different. In order to help you in your fact gathering experience I have included a huge amount of information for you.
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Benefits of Reverse Mortgages: (also called HECM – heck-uhm)
Increase your monthly cash flow for as long as you live in the home. You can learn more about reverse mortgage optionsĀ here.
As long as there is equity in your home, based on your initial qualifications and growth, you can make changes to the way you access the homes equity. Among the list of awesome features about the line of credit it that the unused portion of the credit line grows at the current rate plus 1.25%. An excellent choice for baby boomers who wish to remain in familiar surroundings and in the same area where they have resided for years.
Moving can result in psychological turmoil for many senior homeowners. Memories were created in your “home sweet home”, and close proximity to loved ones and remaining 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. Normally, the only out of pocket costs you will have are the HUD counseling fee and the appraisal. But additional fees may apply depending upon the situation and type of property.
You can remain in your home no matter what is owed on your Reverse Mortgage. You can never be forced from your home providing your real estate taxes and homeowner’s insurance are paid and as long as you maintain your home.
You can only refinance into another reverse mortgage if you’re getting a 5 to 1 ratio. To qualify you have to gain access to $5 of equity for every $1 of cost for the new loan.
Neither you, your estate or your heirs can ever owe any more than the value of the home.
Your assets cannot be attached to repay the mortgage debt, and the debt will never pass to your heirs or your estate. The house represents the debt (non-recourse loan).
Reverse Mortgages have numerous safeguards: capped mortgage rates, a restriction on fees, HUD counseling, asset protection (non-recourse loan), no maturation date (cannot become due during a borrower’s life-time).
Could be a financial tool to help heirs avert a few of the real estate tax.
Your heirs may be able to claim the interest from your mortgage on their own income taxes after your death. (Make sure to consult your income tax advisor for help.)
Those were the pros, the good things. Easy stuff 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:
They can and frequently are higher priced than a conventional loan. However, you should not really compare them as they are very different loan products.
A Reverse Mortgage can cut your kid’s as well as grandchildren’s inheritance. A Reverse Mortgage is a growing debt loan since you are not making mortgage payments. It’s the complete opposite of a typical mortgage where equity increases as mortgage payments are paid.
You will typically net more money from the sale of your property than you’ll with a reverse mortgage.
Moving from your residence in under five-years makes a Reverse Mortgage risky. It does not make good sense to use a Reverse Mortgage short term.
If you don’t pay your real estate taxes or homeowner’s insurance or can’t maintain the home, the bank might require repayment of the debt. (Loan providers, however, will certainly work with you to cure the default.)
The mortgage company can also begin the foreclosure process if you have not resided in the home for 12 consecutive months.
Medicaid may 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 yourself a Reverse Mortgage:
If you happen to just need short-term access to cash and capital.
{In the event your major goal is upgrading your home, a community gift may work better.|If you simply need to add a roof, windows or other energy efficient options. If that is the case, grants and assistance might be available. Go here for more reverse mortgage information.
If you know you’re going to be moving to an assisted living facility in the very near future.
When family members suggest that a senior reverse mortgage isn’t really a wise decision, start thinking about their suggestions and keep an open mind; they have your best interests at heart.
If you have other options such as moving in with friends and relations or the capacity to pay for senior living facilities.
If you use the home or property for agriculture.