I meet with baby boomers that own a home and are very seriously considering getting a reverse mortgage or at the very least, are curious about them. ”Is this the appropriate decision for me and my spouse?” Can my home get foreclosed on with a reverse mortgage? Who’s going to be on title, me, the lender, the government or all of us? Those are some of the most common thoughts that I hear, There are all sorts of pros and cons in every decision. When it comes to obtaining a reverse mortgage, some critical thinking and decisions should be made. Below is a variety of information about reverse mortgage for you to take into account.
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Benefits of Reverse Mortgages: (also called HECM – heck-uhm)
Increase your monthly cash flow for as long as you live in the home. You can learn more about your options with a reverse mortgageĀ here.
It is possible to modify your plan at any time from the line of credit, cash out, monthly checks, or a combination (dependant upon what remains). Among the list of fantastic features in regards to the line of credit it that the unused part of credit line grows at the current rate plus 1.25%. An excellent choice for baby boomers who would like to remain in familiar surroundings and in the same neighborhood where they have lived for years.
Moving may cause mental chaos for a lot of elderly home owners. Memories were made within your “home sweet home”, and close proximity to loved ones and residing in your community can be a better choice.
You do not have to own you home free and clear to qualify for a reverse mortgage. There isn’t any out of pocket expenses other than the appraisal fee and HUD counseling. Some HUD counseling organizations may waive the charge.
You’ll be able to remain in your house regardless of 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.
You can only refinance into an additional reverse mortgage if you’re getting a 5 to 1 ratio. To qualify you have 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 pay back the mortgage debt, and the debt will never pass to your heirs or your estate. The home represents the debt (non-recourse loan).
Reverse Mortgages have several safeguards: capped rates, a restriction on fees, HUD counseling, asset protection (non-recourse loan), no maturation date (cannot become due within a borrower’s lifetime).
Beneficiaries may get a tax break after the house is sold and the interest is all paid at once.
Your heirs may be able to claim the interest from your mortgage on their own income taxes after your passing. (Make sure to consult your income tax advisor for recommendations.)
Everybody likes the good stuff or the pros. 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 the common settlement costs you find with a normal mortgage loan. However, they may be more expensive. There is FHA mortgage insurance and extra settlement costs, yet those expenses are standard of any FHA mortgage.
If 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 rising debt loan since you’re not making mortgage payments. It’s the complete opposite of a typical mortgage loan where equity increases as mortgage payments are paid.
Selling your house can produce a higher bang for your buck than a Reverse Mortgage.
Moving from your home in less than 5 years tends to make a Reverse Mortgage unwise. It does not make good sense to use a Reverse Mortgage short term.
If you fail to pay your real estate taxes or homeowner’s insurance or aren’t able to maintain your home, the mortgage company might require repayment of the debt. (Lenders, however, will probably work with you to cure the default.)
The lender can also begin the foreclosure process if you haven’t lived in the home for Twelve straight months.
You may not be entitled to needs based programs and assistance such as Medicaid.
When NOT to get yourself a Reverse Mortgage:
An equity loan might be a lower priced way of getting cash out of your house.
{In the event your primary objective is fixing up your house, a community loan may work much better.|In the event you only need to add a roof, windows or other energy efficient options. If that is the case, grants and assistance might 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 and friends believe that a senior reverse mortgage isn’t really a good option, consider their recommendations and maintain an open mind; they’ve got your best interests in mind.
If your kids encourage you to move in with them, this may be a wonderful solution to staying in your own property.
If you use the property for farming.