What Is A Reverse Mortgage! 5 Points To Read Before You Decide
I get some mails every now and then, when a senior wants to me to explain
, what is a reverse mortgage. My answer in the first phase is, that it is a reverse home loan, with which an American senior age 62 or over, who has equity in his home, can take part of that equity and change that into cash money for his daily needs.
In this article, I do not handle the technical details but your personal needs and I try to raise some questions for you, so that you can get a clear picture, whether you have deeply thought the needs that you have or have not.
1. Do You Honestly Need It?
In many cases the reverse loan is not the best idea to finance your needs. If your need is to spend a dream cruising vacation with your spouse and to pay it by taking the reverse mortgage loan, you should rethink the plan.
This is a typical case, when other finance methods offer a better option. The idea of a reverse loan is that you use the equity of your home to pay something. That equity you have paid during many years, so you have to think very carefully for what purpose you use the money.
2. These Are Costly Loans.
The younger you are, the more months your loan has time to grow. The upfront costs are quite high and if you have taken your loan with the movable interest rate, which follow the market price, your costs will grow month after month. If you take the loan at age 62 and keep it only for a short period, it becomes very costly.
3. Is This The Right Time To Use The Equity Of Your Home.
The earlier you take the reverse loan, the less you have in use later. If the equity of your home is the only money you have saved, think very carefully before you start to use it and clear all the points about what is a reverse mortgage. Later, when you are older, you may have some sudden and surprising expenses, like new monthly medical costs, for which you need money.
4. What Do You Want To Leave To Your Heirs?
Have you discussed with yourself, your spouse and your relatives about how much, if any, you want to live to your heirs. The reverse mortgage loan eats the equity of your home and it can also happen, that the whole equity is eaten even before you will die. If it is okay for you, then it is okay, but you have to clear up, how your plan will handle the heritage. Are you happy with that?
5. What Is A Reverse Mortgage Alternative?
Let us assume, that you need cash money to pay the home repair. Many states in US offer low cost loans for this purpose, so there is no need for a reverse mortgage.
So as you see, the reverse mortgage loan includes many details, which are very costly for you. This means, that when you get enough information about what is a reverse mortgage, you will get some surprises and to find out that the market has better options for your special needs. I warmly recommend the personal counseling, where an expert will explain to you the details.
by: Juhani Tontti
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