The Facts You Need To Know
By boomeryearbook.com
There comes a time in our lives when we need a little extra money to take care of everyday expenses or an unexpected occurrence. For many Baby Boomers, some of these expenses may include medical, home improvements, and/or supplementing your social security income. Many have decided that a reverse mortgage loan would be the best option to meet their needs. But is it? Let’s look at some facts with regards to this revolutionary mortgage idea.
What is a Reverse Mortgage?
A reverse mortgage allows you to turn your home equity into cash that you can use, without you having to sell your home or take out any additional loans. You remain the owner of your home; you keep title, and continue to live there as before. You can choose to receive payment in a lump sum, in monthly or quarterly payments, or as a line of credit. Sounds pretty reasonable, doesn’t it? Now, how do you go about getting a reverse mortgage?
Do You Qualify?
To qualify for a reverse mortgage the following applies:
• You must be 62 years of age or older.
• You must live in your home.
• You have paid off any existing mortgages on the property.
• Neither your credit rating nor your income is considered.
• The amount of money available to you will be based on the value of your home, government or lender limits, your age, current and future interest rates, and fees collected by the lender or intermediaries.
A reverse mortgage requires no repayment as long as you are living in your home and must be paid in full when the last living resident of the home dies, sells the home or makes a permanent move. Also, not every type of home is eligible, so it is important that you do some research to know if yours does.
Reverse mortgages are offered by state and local governments as well as banks, saving associations, and mortgage companies. Those offered by government are less expensive and have lower fees and rates; however they usually have to be used for specific purposes such as home repairs. The others are much more expensive; however they do not require any explanation for the use of the funds.
What are the Pros and Cons?
There are many advantages to a reverse mortgage, especially when you are your wits end and need immediate help. You are able to continue to own and live in your house and receive the funds that you need according to your choosing, whether it is in one lump sum, monthly, quarterly, or as a line of credit.
However, there are many aspects to consider before choosing this route:
• The first thing to consider is the fact that this loan is very expensive and the amount you owe grows more each month. According to the American Association of Retired Persons (AARP), origination fees and insurance premiums typically eat up $25,000 or more of the total proceeds of a common reverse mortgage on a $250,000 house.
• Consider how long you plan to continue living in your home. The longer you live in your home the more cost effective a reverse mortgage is. If you only plan on living there for several more years, then you might want to reconsider this option.
• Reverse mortgages could have tax consequences, affect your eligibility for assistance under Federal and State programs, and have an impact on your estate and heirs.
Get All the Facts
It is recommended that you seek independent counseling on the matter before signing any contracts. This is a very important decision that can affect the rest of your life. Be sure to know exactly what you’re getting into and with whom. Be on the lookout for predators who try to scam you for everything you worked so hard to obtain. Make sure you’ve explored other options of earning more income before you make a final decision because it is not easy to reverse a reverse mortgage.
What do you think about reverse mortgages? Are they good for Baby Boomers or not? Share your opinions with us at BoomerYearbook
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