What are Reverse Mortgages and is it Right for You?
January 7, 2010 by admin · Leave a Comment
So, what are reverse mortgages and how does one know whether they are right for it or not? A reverse mortgage uses the existing equity in your home to provide money for the homeowner, without having to pay it back until either one of two things happen; either you die, you move out or you sell the home. Many financial institutions such as banks and private companies like Quicken Loans have increasingly underwriting more and more reverse mortgages as their popularity amongst mortgage consumers grows. It is not meant for all, although, for an elderly person with little assets, a reverse mortgage can be exactly what they are looking for. Many retired homeowners opt for this mortgage to use their home equity for housing repairs, living expenses or much needed health care. So what happens in the event you pass away, you move or sell your house? The house can be sold by your reverse mortgage lender to pay off the loan or the heirs can refinance with a regular mortgage. Of course there are advantages and disadvantages to any loan, especially if it seems too good to be true.
When choosing a reverse mortgage, you are provided with three choices for receiving money: a lump sum payout, a monthly payment and a line of credit (depending on how much you need). For those that are 62 or older and have no outstanding lien of debt qualify for a reverse mortgage. Some are eligible to use their reverse mortgage to pay off their previous mortgage. The best candidate for this type of mortgage is those that are not planning on moving. Reverse Mortgages can be an excellent way for those to keep their house and have a steady monthly income throughout retirement.
Not everyone is a right candidate. Reverse mortgages tend to have higher interest rates and fees. Those that are planning to keep their estate within the family should do their research and speak to their family members and estate planner before entering into a reverse mortgage to make sure it is the right choice for them and their loved ones.
