Is the majority of your net worth as a senior tied up in the value of your home? You can take advantage of that value by turning it into cash with a reverse mortgage.
Always use a lender you trust and ask yourself why you want a reverse mortgage. Do you need to pay for home repairs or property taxes? Before you decide to take out a reverse mortgage, you need to understand what a reverse mortgage is and how it may—or may not—benefit you.
Reverse mortgages are designed for seniors aged 62 and over, allowing them to convert their home equity into cash income. Unlike a normal mortgage, a reverse mortgage is when a lender pays you monthly instead of you paying the lender. You must have enough home equity built up
You cannot borrow 100% of your home’s value. The amount you are able to borrow depends on your lender and payment plan.
A reverse mortgage is not a cash-out refinance! Cash-out refinances are for all homeowners and users will have to pay P.I.T.I., as well as have a good credit score. There is no minimum credit score requirement for reverse mortgages.
There are 3 types of reverse mortgages that determine how much money you will be able to take out:
Many reverse mortgages are federally insured but there are many scams going around that target seniors wishing to take out a reverse mortgage. If you believe that you may have been a victim of a mortgage fraud scheme, contact your local authorities.
Fees for reverse mortgages are not cheap, with the up-front insurance premiums calculated based on the home’s value. For example, for every $100,000 in appraised value, you pay $2,000. As you will be spending a significant amount of equity on interest and fees, be sure that you will continue to be living in your home long term.
You also run the risk of outliving the reverse mortgage and not having enough money left then you need it. It also means you may not be able to pass your house down to relatives.
When used correctly, reverse mortgages can be a great financial decision for homeowners. Before taking out a reverse mortgage, work with your lender and financial advisor. They will be able to help you decide if a reverse mortgage is in your best financial interest.
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