I speak with senior homeowners every day that have tons of questions about the efficacy of Reverse Mortgages. Should I or shouldn’t I get a reverse mortgage? Is It Possible To lose my home? “Now the bank will be on the title of my property, not me, right?” Those are probably the most frequent questions that I hear, With many choices in life, you need to decide what makes the most sense. This is also true with a reverse mortgage loan. In order to help you in your fact gathering quest I have included a huge amount of information for you.
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Benefits of Reverse Mortgages: (also called HECM – heck-uhm)
More cash flow guaranteed by the Government which continues as long as your property is your primary residence. You can learn more about the reverse mortgage home loan optionsĀ here.
Provided that there is equity in the home, based on your initial qualifications and growth, you could make changes to the way you access the homes equity. Line of credit grows month after month at 1.25% over the current interest rate. A great choice for those that wish to remain in there home.
Moving can cause psychological problems for many older homeowners. Memories were created in your “home sweet home”, and close proximity to loved ones and remaining in your community could be a more sensible choice.
You do not have to own you home free and clear to qualify for a reverse mortgage. There aren’t any out of pocket costs besides the appraisal fee and HUD counseling. Some HUD counseling companies may waive the charge.
You’ll be able to remain in your home irrespective of what is owed on your Reverse Mortgage. You may 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.
It is possible to refinance out of the reverse mortgage in to a traditional loan presuming you meet the requirements 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 referred to 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 awesome options with this home loan like the fees being limited and interest rates are capped.
Could be a financial tool to help heirs avoid a portion of the real estate tax.
Your heirs might be able to claim the interest from your mortgage on their own income taxes after your passing. (Make sure to consult your tax advisor for recommendations.)
Those were the pros, the good things. Pretty easy, right? Sure, the dutiful old loan officer always gives you the good parts, but there are some things that may be drawbacks to Reverse Mortgages. Here are the cons:
The CONS of Reverse Mortgages:
A Reverse Mortgage includes all of the common settlement costs one finds with a standard mortgage. However, they can be more costly. There is FHA mortgage insurance and additional settlement costs, but those expenses are standard of any FHA mortgage.
A Reverse Mortgage can reduce your kid’s as well as grandchildren’s inheritance. Since 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 opposite of a standard mortgage where equity increases as mortgage payments are made.
Selling your home will supply a better bang for your buck than a Reverse Mortgage.
These financing options definitely don’t make sense if you are planning on moving in the future.
If you don’t pay your real estate taxes or homeowner’s insurance or can’t maintain the home, the lender may require repayment of the debt. (Lenders, however, will certainly work with you to cure the default.)
The lending company can also begin the foreclosure process if you have not lived in the home for 12 consecutive months.
You may not be eligible for needs based programs and help such as Medicaid.
When NOT to get a Reverse Mortgage:
For those who only need temporary access to cash and equity.
{If your major goal is repairing your home, a community loan may work better.|If you simply need to add a roof, windows or other energy efficient options. If that is the case, subsidies and assistance might be available. Go here for more reverse mortgage information.
Once you know you are going to be moving into an assisted living facility in the very near future.
When family members suggest that a senior reverse mortgage isn’t really a good option, consider their recommendations and keep a balanced view; they’ve got your best needs in mind.
Should you have other options such as moving in with friends and family or the ability to spend money on senior living facilities.
A homeowner whose property makes use of more than 25% of the overall livable space for their business isn’t going to be eligible for an FHA Reverse Mortgage.