Should you use a reverse mortgage? First, you have to make sure you qualify. Reverse mortgages are only for those who are 62 and older, who own a home with significant equity, and those who expect to live in their home for many years.
A reverse mortgage must be paid back to the lender when you no longer plan to use your home as your primary residence. This can occur upon death, when you decide to sell the home, or if you have to move out longer than 12 months. At that time, the loan balance or market value of the property must be paid to the lender.
In addition, there are many details also to consider. Look at the following list of pros and cons.
Pros:
1. A reverse mortgage may allow you to keep your home after retiring.
2. It provides an opportunity to gain value from your greatest asset – your house.
3. They can be an avenue for financing if a senior has limited investments or retirement accounts.
Cons
1. The cost of this type of “loan” is very expensive.
2. The government places strict limits on the size of your reverse mortgage.
3. If you have to move from your home, you will incur large fees and interest.
4. Interest rates are usually adjustable and unstable.
5. Rates and fees are higher than typical mortgages.
6. You still must pay taxes and insurance on the home.
Given these advantages and disadvantages, it is important to weigh your options before taking out a reverse mortgage. Would it be better to simply sell your home and move to smaller, cheaper place? Can you use your home as a rental for investment income?
Sit down and review all your numbers to find out the best solution for your individual retirement needs.
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*Paying off your Mortgage Early