I meet with senior homeowners that are thinking about getting a reverse mortgage. Will it be a bad idea or a wise course of action to get a reverse mortgage loan? Can I lose my home? Whose property is it really when I get a reverse mortgage? Those are all very serious and very good questions. There are all sorts of good and bad points in every decision. Reverse Mortgages aren’t any different. Below is a variety of information about reverse mortgage for you to take into consideration.
See these other pages: Antelope, North Highlands, Foothill Farms, Walerga
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 reverse mortgagesĀ here.
You are not tied to the decision you initially make. You could make modifications to the way you obtain funds from your home at any time, assuming equity remains. The remainder of the Credit line grows larger on a monthly basis at 1.25% over the current interest rate. An excellent choice for baby boomers who want to stay in familiar surroundings and in the same community where they have lived for years.
Relocating can result in mental hardship for many elderly homeowners. Memories were made within your “home sweet home”, and close proximity to loved ones and remaining in your area could be a more sensible choice.
Reverse Mortgages can satisfy your existing mortgage loan or debts, though your financial obligations are moved to your Reverse Mortgage balance. (Your home does not have to be free and clear to qualify.) There aren’t any out of pocket expenses other than the appraisal fee and HUD counseling. Some HUD counseling organizations will waive the fee.
You can stay in your house no matter what is owed on your Reverse Mortgage. You can’t ever 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 into a traditional loan presuming you qualify 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.
Your financial assets may not be attached to pay back the mortgage debt, and the debt will not pass to your heirs or your estate. The house represents the debt (non-recourse loan).
Reverse Mortgages have numerous safety measures: capped interest levels, a restriction on fees, HUD counseling, asset protection (non-recourse loan), no maturity date (cannot become due within a homeowner’s life-time).
Heirs can get a tax break when the house is sold and the interest is all paid at once.
Your beneficiaries could possibly claim the interest from your mortgage on their own income taxes after your passing away. (Make sure to consult your income tax advisor for recommendations.)
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 CONS of Reverse Mortgages:
They can and quite often are higher priced than a traditional mortgage loan. However, you can not really compare them as they are very different loan products.
In the event that all 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 rising debt loan since you’re not making mortgage payments. It is the opposite of a standard mortgage where equity increases as mortgage payments are paid.
You will typically net more cash from the sale of your property than you will with a reverse mortgage.
Moving out of your home in less than five-years tends to make a Reverse Mortgage risky. It doesn’t make good sense to use a Reverse Mortgage short term.
In the event that you don’t pay your taxes or insurance the lender may foreclose on your home.
If you’re not living in your primary home for a period exceeding 12 continuous months, the Reverse Mortgage will become due. (Nursing facilities, assisted living, moving, etc.)
You may not qualify for needs based programs and support such as Medicaid.
When NOT to get a Reverse Mortgage:
If you happen to only need short-term access to cash and capital.
{In the event your primary goal is upgrading your house, a community grant may work better.|For those who 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.
Once you know you’re going to be moving into an assisted living facility in the very near future.
When family members believe that a senior reverse mortgage isn’t really a wise decision, consider their recommendations and keep an objective balance; they may have your best interests at heart.
If you have other options such as moving in with family and friends or the capacity to spend money on senior living facilities.
A home-owner whose home utilizes at least 25% of the complete liveable space for their home business will not qualify for an FHA Reverse Mortgage.