I meet with baby boomers that own a house and are seriously considering getting a reverse mortgage or at the very least, are curious about them. “Is this a wise decision for me?” Could the federal government take my property? Who will be on title, me, the bank, the us government or perhaps all of us? Those are some of the most common questions that I hear, Other parts of life have advantages and disadvantages. When it comes to obtaining a reverse mortgage, some serious thinking and decisions will have to be made. Below is a variety of information about reverse mortgage that you can think about.
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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 the reverse mortgage home loan optionsĀ here.
As long as 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. One of the fantastic features about the line of credit it that the unused portion of the credit line grows at the current rate plus 1.25%. A great option for those that wish to remain in there home.
Relocating can result in mental chaos for many senior homeowners. Memories were made in your “home sweet home”, and close proximity to loved ones and residing in your area could be a better choice.
Reverse Mortgages can satisfy your current mortgage or financial obligations, even though your debts are transferred to your Reverse Mortgage balance. (Your house does not have to be free and clear to qualify.) Almost all of the closing costs can be lumped into the loan with the exception of the counseling fee and appraisal.
You’ll be able to live in your home no matter what is owed on your Reverse Mortgage. You may never be forced out of your home provided that your real estate taxes and homeowner’s insurance are paid and as long as you maintain your home.
It is possible to refinance your Reverse Mortgage repeatedly so long as there is remaining equity in your home.
After the sale of your property you will never owe more than the home is worth.
This is what is 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 several awesome features with this mortgage like the loan fees being limited and interest rates are capped.
Might be a financial tool to help heirs avert a portion of the real estate tax.
Your heirs might be able to claim the interest from your mortgage on their income taxes after your passing. (Be sure to speak to your income tax advisor for guidance.)
Everybody likes the good stuff or 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 features lots of the standard settlement costs you find with a normal home loan. However, they may be more costly. There is FHA mortgage insurance and additional settlement costs, but those costs are normal of any FHA mortgage.
In the event that whatever you are leaving for an inheritance is your home, there may or may not be equity for you to leave behind. A Reverse Mortgage really is a growing debt loan because you are not making mortgage payments. It is the opposite of a standard home loan where equity will increase as mortgage payments are made.
You will typically net more cash from the sale of your house than you will with a reverse mortgage.
Moving from your home in under five years tends to make a Reverse Mortgage risky. It does not make good sense to use a Reverse Mortgage short term.
If you’re unable to pay your real estate taxes or homeowner’s insurance or fail to maintain the home, the lender may require repayment of the debt. (Financial institutions, however, will probably work with you to cure the default.)
If you’re not living in your main home for a period exceeding beyond 12 continuous months, the Reverse Mortgage will become due. (Nursing facilities, assisted living, moving, etc.)
Medicaid might be affected, and you may not qualify for benefits unless of course you spend down your Reverse Mortgage proceeds each month. (Seek advice from your attorney and Medicaid for info.)
When NOT to obtain a Reverse Mortgage:
For those who only need short term access to cash and capital.
{If your primary goal is upgrading your home, a community gift may work much better.|In the event you simply need to add a roof, windows or other energy efficient options. If that is the case, subsidies and assistance might possibly be available. Go here for more reverse mortgage information.
Should you be ill and assisted living or a an elderly care facility is approaching, don’t choose a Reverse Mortgage.
When family and friends believe that a senior reverse mortgage isn’t really a great option, give some thought to their recommendations and preserve a balanced view; they’ve got your best interests at heart.
If your kids invite you to move in with them, this can be an excellent option to staying in your own house.
If you use the home for farming.