I meet with seniors that own a home and are seriously considering getting a reverse mortgage or at the very least, are curious about them. Should I or shouldn’t I get a reverse mortgage? Can my property get foreclosed on with a reverse mortgage? With a reverse mortgage the financial institution receives the home, not my loved ones, when I die, correct? Those are among the most frequent concerns that I hear, With many choices in life, you need to decide what makes the most sense. Making a decision about a reverse mortgage is no different. Below is a variety of information about reverse mortgage that you should take into consideration.
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Benefits 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 home loansĀ here.
Provided that 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. One of several awesome features in regards to 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.
Moving may cause mental chaos for a lot of senior home owners. Memories were made in your “home sweet home”, and close proximity to loved ones and residing in your town might be a better choice.
Get rid of your monthly mortgage payment and pay off those stubborn credit cards and other debt. Typically, the only out of pocket expenses 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 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.
It is possible to refinance your Reverse Mortgage again and again provided that there is remaining equity in your home.
You can’t ever owe any more than the property is valued at.
Your assets may not be attached to repay the mortgage debt, and the debt will not pass to your heirs or your estate. The home represents the debt (non-recourse loan).
There are numerous awesome options with this home loan like the loan fees are limited and interest rates are capped.
Heirs may get a tax break when the home is sold and the interest is all paid at once.
Your heirs may be able to claim the interest from your mortgage on their income taxes after your death. (Make sure you consult your income tax advisor for guidance.)
Now, those are the pros. Super simple, no? Of course the loan officer starts off with the good stuff. Here are the cons:
The Negatives of Reverse Mortgages:
They can and quite often are higher priced than a traditional loan. However, you can not really compare them as they are very different loan products.
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. Because 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’s the complete opposite of a typical mortgage loan where equity will increase as mortgage payments are paid.
Selling your home can provide a larger return on your investment than a Reverse Mortgage.
Moving out of your residence in under five-years makes a Reverse Mortgage unwise. It doesn’t 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 aren’t able to maintain the home, the bank might call for repayment of the debt. (Loan providers, however, will certainly work with you to cure the default.)
If you are not living in your primary home for a period exceeding 12 consecutive months, the Reverse Mortgage will end up due. (Nursing facilities, assisted living, moving, etc.)
You might not qualify for needs based programs and help such as Medicaid.
When NOT to obtain a Reverse Mortgage:
An equity loan are often more affordable way of getting cash out of your house.
{In the event your major intention is fixing up your house, a community gift may work much better.|For those who just need to add a roof, windows or other energy efficient options. If that is the case, funds and assistance may be available. Go here for more reverse mortgage information.
Once you know you’re going to be moving to an assisted living facility in the very near future.
In the event your family says you should not get a reverse mortgage, listen to them and have a meaningful discussion with them and the loan officer, together.
Should you have other options such as moving in with relatives and buddies or the ability to spend money on senior living facilities.
A homeowner whose property makes use of at least 25% of the total living space for their company is not going to qualify for an FHA Reverse Mortgage.