The Advantages And Disadvantages Of Reverse Mortgage
If
you are at least 62 years or older and have at least 50% equity in
your home you can qualify for a
reverse
mortgage.While a
reverse
mortgagecan be a good option for your retirement, you may also find the
payouts useful to pay off your existing debts. A reverse mortgage can
be taken either as a line of credit or as a lump sum. But you must
keep in mind that by taking out a reverse mortgage, you will be using
up part or all of an asset, which might otherwise be left to children
or other heirs. Also, your equity will usually be eroding and there
will be less equity available when the lender actually sells the
property. Yet, if you are thinking of retirement, need a steady
source of cash and want to stay in your home, a reverse mortgage can
be a great option.
What
really makes
reverse
mortgage financingattractive is the fact that lenders consider neither income nor
credit history while determining who qualifies. Instead, the only
factors considered important by lenders to determine your
reverse
mortgage eligibilityis your age, the value of your home and the amount of available
equity in your home. Additionally, the reverse mortgage industry is
heavily supported by HUD (US Department of Housing and Urban
Development) and the heavy majority of reverse mortgage loans are
insured by HUDs Federal Housing Administration (FHA). This product
makes it possible for you to pull needed cash from the equity of your
home, without incurring monthly expenses. Lenders cannot force
homeowners to sell the property to pay back the loan. Also, reverse
mortgages guarantee that you can stay on the property for as long as
you live, even if the outstanding loan and interest grow to exceed
the value property's value.
While
reverse mortgages may look attractive, it is advisable to also
consider their disadvantages before taking your decision. First, a
reverse mortgage can cost thousands more than a conventional mortgage
and the fees, which are often rolled into the loan and not paid
upfront, can be quite high. Second, it is important to evaluate your
net gains because once you enter a reverse mortgage agreement, the
mortgage company essentially owns your home. It's important that you
are convinced of the gains because getting a reverse mortgage is
essentially the same as spending the money you'd expect to leave to
your heirs. Third, in order to reduce their risk lenders generally
limit reverse mortgage loans to amounts that are below their estimate
of the property's full value. Therefore, you may actually find that
selling your home and moving to a less expensive home is a better
option to protect your assets for yourself and your family.
But
the good thing is that this product is heavily regulated by FHA and
the absence of private reverse mortgage products has kept the costs
and overall expense of reverse mortgages in reasonable check.
Additionally, with this product you can always rest assured that you
will never need to leave your home unless you choose to do so. Even
if you "out live" your loan, the lender will not be able to
take the home or force you to leave. These facts certainly make a
reverse mortgage a great option for your retirement. But it is always
advisable that before you take your decision, you should establish
your financial goals, learn about your options, and understand
clearly your specific needs.
by: Ask Bill
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