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subject: The Advantages And Disadvantages Of Reverse Mortgage [print this page]

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

mortgage

can 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 financing

attractive 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 eligibility

is 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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