Is A Reverse Mortgage Right For You?

In the last few years, reverse mortgages have been increasing in popularity among the elderly

. While there are numerous advantages associated with reverse mortgages, there are also drawbacks too. Before you take out a reverse mortgage, be certain you have the whole story.

First, comprehend what's involved in a reverse mortgage. Essentially, this kind of mortgage permits you to transfer a part of your equity into cash without the need to take on an extra monthly bill, as they are the case with a regular home equity loan, or sell your house. With a reverse home mortgage, in contrast to a regular mortgage, you obtain money for the equity in your home and are not required to pay it back until you are no longer living in your home. It ought to be comprehended that the money will need to be paid back; either when you sell your home, move to another principal residence or die. In case that you have a great deal of equity in your home but you're having trouble meeting your monthly financial obligations, this can be a good option. Other positive aspects include the fact that the money you receive from the reverse mortgage is typically tax-free since it will have to be repaid. Additionally, according to which lender you select, there are usually no income restrictions.

You will find regulations so as to qualify for a reverse mortgage. You should be at least 62 years of age and live in the home as your principal residence.

You will find 3 basic types of reverse mortgages. These mortgages are single-purpose reverse mortgages, federally-insured reverse mortgages which are also referred to as Home Equity Conversion Mortgages or HECMs and proprietary reverse mortgages.

Single purpose reverse mortgages are provided by state and local government agencies and also a few non-profit organizations. One of the significant positive aspects to this kind of reverse mortgage is that it'll not generally have high costs. Regrettably, their availability is limited relying on where you live. Additionally, there may be regulations specified by the lender regarding what you can make use of the proceeds of the loan for. The most common purposes include property taxes and home repairs and improvements. This type of loan may also have income restrictions; which means you can't make a lot more than a certain amount of money so as to qualify.

A HECM will generally have higher cost than a single purpose mortgage and those costs are usually up front. On the flip side, they are a lot more widely available and usually don't have income requirements. Additionally, you will find no purpose limitations. Since HECMs are backed by HUD, you'll be required to meet with a counselor from a housing counseling agency who will explain all of the details regarding the loan to you. The amount of money you are able to borrow using a HECM will depend on your age, the value of your house, where you live and current interest rates. This type of loan can be quite flexible; giving options for example a line of credit and also fixed monthly payments.

Because proprietary reverse mortgages are backed by private loan companies, the choices with this type of loan can differ. Generally this type of loan will have a higher cost than a HECM.

Reverse Mortgage Disadvantages

by: Alex Tesla

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