Should I Get a Reverse Mortgage?

More and more seniors are asking themselves: “Should I get a reverse mortgage?” A reverse mortgage is a loan against your home that you do not have to pay back as long as you live there. You or your estate pays the money back plus interest when you die, sell your home, or permanently move out of the residence. You also have the option of paying off the mortgage beforehand, if you have the money to do so. A reverse mortgage can be a great product for seniors who wish to access their home equity. But there are drawbacks to the program and it is not for everyone. Is a reverse mortgage right for you? Read on to find out if you should get a reverse mortgage:

Do You Need or Want the Cash?

When trying to figure out, “should I get a reverse mortgage,” the most important consideration is whether or not you need (or want) additional funds for retirement. Many people have opinions about reverse mortgages, but the reality is this: reverse mortgages can be a great way — and sometimes the only way — for seniors to get access to their home equity to use however they want. Seniors are living longer than ever and many people need to tap their home equity to fund their longevity. Many people use Reverse Mortgages to supplement their retirement income, fund medical expenses, pay for education expenses, or even fulfill a lifelong dream like traveling. Reverse mortgages can also be a great way to eliminate your mortgage. If you have an existing mortgage against your house, a reverse mortgage may enable you to pay it off. This will save you money every month by eliminating your mortgage payment and possibly even leave additional cash available to you.

Should I Get a Reverse Mortgage? Are You Eligible?

Eligibility requirements for a reverse mortgage include:

• Age: At least one title holder must be 62 years of age or older.

• Home Equity: Borrowers must be eligible for a loan amount sufficient to pay off all mortgages and liens on your property. A reverse mortgage must be the only loan on the property, and if the funds from the reverse mortgage don’t enable you to eliminate all other mortgages, then you will not qualify.

The amount of money you can get from a reverse mortgage is determined by a calculation that takes into account the borrower’s age, current interest rates, and the total value of your property. The amount of money you can get from a reverse mortgage must be more than what you currently owe on your home.Typically, you will generally qualify for a Reverse Mortgage if you owe less than 50 percent of your home’s value, but some people qualify despite owing as much as 80 percent of the value of their home. If you would like to find out how much you are eligible for and verify whether or not you have sufficient equity to qualify, try our reverse mortgage calculator.

• Ownership, residency and home type: You must own and live in the home with the reverse mortgage.

In most cases second homes, apartment buildings and homes less than a year old are not eligible for a reverse mortgage. Some companies may accept 2-4 unit owner-occupied dwellings, along with some condominiums, planned unit developments, and manufactured homes. Generally cooperatives are not eligible.

• Financial considerations: You must be able to continue to maintain your home and pay all insurance sand property taxes on the residence. This will be determined by a financial assessment during the loan application process.

Other Considerations

Even if you need or want the cash and meet the eligibility requirements for a Reverse Mortgage, there are other important considerations when deciding, “should I get a reverse mortgage.”

• How Long Do You Expect to Reside in Your Home?  Many financial experts believe that you should plan on residing in your home for a number of years if you intend to get a reverse mortgage. Why? reverse mortgages have relatively high closing costs and as the reverse mortgage loan comes due if your home is no longer your primary residence, it is not necessarily the best short term option.

• Medicaid Eligibility  Reverse mortgages do not generally have any impact whatsoever on your Social Security payments, Medicare or pension benefits.

However, a reverse mortgage can affect your eligibility for Medicaid and other low-income programs such as SSI. If you are enrolled in Medicaid or another low income program, you need to be careful that the income from a reverse mortgage does not disqualify you from these benefits.

• Your Heirs: Many people are concerned about what happens to a home with a reverse mortgage after they die. While a reverse mortgage does decrease your equity and can impact the overall value of your estate, you can still leave your home to your heirs and they will have the option of keeping the home and refinancing or paying off the mortgage or selling the home if the home is worth more than the amount owed on it. In addition, there can actually be estate planning benefits to a reverse mortgage.

Alternatives to Reverse Mortgages

Reverse mortgages continue to increase in popularity. However, there are other options for accessing your home equity. Consider these options: HELOC: Many seniors consider a HELOC – a home equity line of credit. The main downside with this type of product is that there are income requirements in order to qualify. Additionally, unlike a reverse mortgage, the loan must be paid back via monthly payments. On the other hand, the overall impact of a HELOC on your estate tends to be less than that of a reverse mortgage. Downsizing: Moving to a less expensive residence can be a financially efficient way to access your home equity. Continue here to compare the different ways of tapping your home equity for retirement. Or, if you would like to be connected with a prescreened reverse mortgage lender, continue here. Boldin will only connect you with lenders who are properly licensed, approved by the Department of Housing and Urban Development (HUD), and adhere to the National Reverse Mortgage Lenders’ Association (NRMLA) Code of Ethics.