Luglio 9th, 2008
5 Reverse Mortgage Tips to watch out for
If you’re a senior aged 62 years and above and looking to cash out equity in your home, then reverse mortgage is worth considering. Reverse mortgages help you convert home equity into steady flow of tax-free income, either on a monthly basis or at regular intervals as stated in the loan doc.
Here are 5 tips for you to follow while getting a reverse mortgage.
- Assess your financial situation:
You need to analyze your financial situation and understand whether a reverse mortgage can suit your purpose. If you already have a mortgage on your home, then you’ll have to pay it off to qualify for a reverse mortgage.The lender may even ask you to repay it with the proceeds of the loan. So, you need to think as to whether the reverse mortgage proceeds left over after paying off earlier debts is enough to serve your purpose. Only then you should consider a reverse loan; otherwise, there are other loans wherein you can use your equity to pull cash out of your home.
- Check out the upfront costs:
Reverse mortgages are quite costly. As a borrower, you need to pay upfront origination fees and closing costs. It’s better to get an understanding of what fees and costs you need to pay and on which items so that you make sure that you aren’t paying more than is required. - Know how reverse mortgage works:
Reverse mortgages are offered against your home equity. So, if you use up all your equity now, you may have little to pay for healthcare or other expenses later on. While you take out a reverse mortgage, your payments are deferred until you move out of your home or sell it off or pass away. So, the amount you owe will grow with time. Thus, you may have little or no equity to cash out and pay for your healthcare expenses when you grow even older. - Understand your responsibility:
You need to understand what your payments include, when and why the lender may call the loan due. As a borrower, you are liable for the payment of property taxes, insurance and home repairs etc. - Know what options are available:
There are a variety of reverse mortgage programs available in the market – those provided by private lenders as well as those insured by the government. For instance, the Home Equity Conversion Mortgage is insured by the Federal Government. Besides, there are other types of reverse mortgages insured by private insurance companies. So, what you need to do is select the right loan offer that will best suit your situation.It is advisable that you go for counseling prior to taking out a reverse mortgage option. Especially if it’s a government insured reverse loan such as the HECM, counseling is actually required by the law. The best thing about loan counseling is that it helps to analyze your situation and select the best program for you.