I speak with senior homeowners daily that have tons of questions regarding the efficacy of Reverse Mortgages. ”Is this the best decision for me and my spouse?” Can I lose my home? Who’s on title to the property when you invest in a reverse mortgage? Those are probably the most frequent concerns that I hear, Other areas of life have positives and negatives. Making a decision about a reverse mortgage is no different. In order to assist you in your fact gathering experience I have included a huge amount of information for you.
See these other pages: Verona, Sankey, King Farms, Counsman
The PROS of Reverse Mortgages: (also called HECM – heck-uhm)
Improve your monthly cash flow for as long as you live in the home. You can learn more about reverse mortgage optionsĀ here.
You’re not tied to the decision you initially make. You could make changes to the way you receive equity from your home at any time, assuming equity remains. One of the really cool features in regards to the line of credit it that the unused part of credit line grows at the current rate plus 1.25%. A great choice for those that wish to stay in there home.
Relocating may cause psychological hardship for a lot of older homeowners. Memories were created within your “home sweet home”, and close proximity to loved ones and residing in your area could be a better choice.
You do not have to own you home free and clear to qualify for a reverse mortgage. There are no out of pocket expenses apart from the appraisal fee and HUD counseling. Some HUD counseling organizations may waive the charge.
You can not be evicted from your home as long as you are abiding by the agreement in the contract. Mainly these agreements include maintaining your home and paying your taxes, insurance and HOA dues.
You can only refinance into an additional reverse mortgage if you’re getting a 5 to 1 ratio. To qualify you need 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 financial assets cannot be attached to repay the mortgage debt, additionally, the debt does not pass to your heirs or your estate. The house stands for the debt (non-recourse loan).
Reverse Mortgages have several safety measures: capped mortgage rates, a limitation on fees, HUD counseling, asset protection (non-recourse loan), no maturity date (cannot become due within a homeowner’s life time).
Beneficiaries may get a tax break once the property is sold and the interest is all paid at once.
Your beneficiaries may be able to claim the interest from your mortgage on their own income taxes after your passing away. (Make sure to consult your tax advisor for information.)
Now, those are the pros. Super simple, no? Of course the loan officer starts off with the good stuff. Here are the cons:
The Disadvantages of Reverse Mortgages:
They can and quite often are higher in price than a conventional mortgage 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. 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 conventional mortgage loan where equity increases as mortgage payments are paid.
Selling your home can often produce a higher return on your investment than a Reverse Mortgage.
Moving out of your home in under 5 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 your home, the mortgage company may require repayment of the debt. (Lenders, however, will certainly work with you to cure the default.)
If you’re not residing in your main home for a period in excess of Twelve consecutive months, the Reverse Mortgage will become due. (Nursing facilities, assisted living, moving, etc.)
You won’t be entitled to needs based programs and help such as Medicaid.
When NOT to get yourself a Reverse Mortgage:
An equity loan are often lower priced way to get cash out of your home.
{If your major objective is upgrading your house, a community gift may work much better.|If you only need to add a roof, windows or other energy efficient options. If that is the case, funds and assistance might be available. Go here for more reverse mortgage information.
In case you are ill and assisted living or a elderly care facility is approaching, do not choose a Reverse Mortgage.
If family members believe that a senior reverse mortgage is not a wise decision, consider their suggestions and keep an objective balance; they have your best interests in mind.
Should you have other options such as moving in with friends and family or the capability to pay for senior living facilities.
A homeowner whose residence utilizes at least 25% of the overall living space for their business isn’t going to be eligible for an FHA Reverse Mortgage.