In this day and age with gas prices continually rising, costs of goods rising, bills to pay, and all the other expenses that eat up all that hard-earned money, it’s no wonder people are struggling to get by, especially the retired and disabled people who live on limited incomes. These struggles have forced many people to get reverse mortgages on their homes, and many other people are seriously considering it. You may even be wondering if you should consider it. Before you make a decision, you should be sure you are well informed about what getting a reverse mortgage entails.
What It Is
When you get a reverse mortgage on your home, the bank pays you instead of you paying the bank like you would with a regular mortgage. It’s a loan that allows you to get cash for some of the equity you have in your home. You can use the money for whatever you want or need. For example, you can use it to supplement your income, or use it to pay off your existing mortgage, or use it to take a vacation, or to make repairs on your home. There are no rules about what the money can be used on. It’s your money to do with what you please.
If you need the money, you will be happy to know that there are no income requirements and no credit score requirements, and you don’t have to pay back the loan as long as you live in your home. This probably excites you to hear, but before you get too excited and run out the door to apply for a reverse mortgage, there are some things you need to think about before taking that leap.
Things to Consider
There are some requirements that need to be met in order to qualify for a reverse mortgage. You must be at least 62 years old and the home must be your primary residence. You also need to have some equity left in your home. You also must keep your homeowner’s insurance and property taxes paid and current.
The cost for a reverse mortgage can vary greatly depending on a number of factors, but it is generally pretty expensive. Things that are considered into the cost would be the mortgage insurance, title insurance, origination fee, recording fees, real estate appraisal, survey costs, monthly service fees, and interest.
Are you ever going to want to move out of your home? Remember, you will never have to pay the loan back as long as you remain living in your home. So what happens if you want to move someday?
If you wanted to leave your home to a family member after you pass away, you may not be able to do that if you get a reverse mortgage because the bank will attempt to collect the balance on the loan from the equity left in your home.
The last thing you also need to think about are any alternative options. If you’re struggling to make ends meet in your current home, would it be a much wiser decision to move to a smaller home? A smaller home would mean cheaper utilities, property taxes, insurance, and much easier maintenance and upkeep.