Many senior citizen homeowners are turning to a reverse mortgage to financially help them during their retirement years. Many of these people have lost their pensions, their investments are starting to dwindle and the price of food and everything else is steadily increasing. As a result, they are looking for ways to save money and a reverse mortgage is one major way they can do that.
Reverse mortgages are available to older homeowners who have equity built up in their home. Instead of making a mortgage payment, these homeowners can receive monthly payments or a lump sum payment and they are not required to pay it back unless they sell the home, breach the agreement, move out of the property or die. But is a reverse mortgage right for you? Here are some questions you can ask yourself to determine if you should get a reverse mortgage.
1. Am I eligible for a reverse mortgage? In order to be eligible for a reverse mortgage, you have to be 62 years old or older. You must also live in the home for which you want to get a reverse mortgage as your primary residence and you have to have some equity built up in that home.
2. Will a reverse mortgage benefit me? Before deciding if a reverse mortgage is going to benefit you financially, you may have to crunch some numbers. There are many factors that determine how much money you will receive each month, including the current mortgage rates, your age, the appraisal of your home and more. In many cases, a reverse mortgage may not be the best move financially. It is always best to consult a professional financial advisor before making your final decision because of all the variables that enter into the decision.
3. Do I plan on staying in the home? If you plan on moving out of your home, you may be responsible for paying off the mortgage before moving out. As a result, if you are planning on retiring to a more tropical climate or if you want to move somewhere closer to your grandkids, a reverse mortgage probably isn’t going to be the best situation for you.
4. Do I plan on passing down your home to my children as part of my inheritance? If you have a reverse mortgage, the mortgage company is likely going to take the home and sell it so they can recoup the balance on the loan, or as much of it as possible. In other words, your heirs probably will not be able to inherit the house after your death.
5. What are my other options? The main reason that most people get a reverse mortgage is because they are having financial problems and a reverse mortgage would help them out. But there may be other options that you can utilize before making the decision to get a reverse mortgage. Is it possible to sell your home and downsize to a smaller home with lower payments? Do you have enough equity built up in your home that you can tap into that to get you through your financial problems? Consider all of your options before making your decision. It would also help to consult with a trusted advisor so you know exactly what your other options are.
Getting a reverse mortgage is a great benefit for many senior homeowners. But there are some cases where a reverse mortgage simply isn’t the best decision that you can make.