A reverse mortgage is something that allows a homeowner to have the opportunity to borrow against their homes equity. This is done while still having ownership of the home. A lot of people use it as a viable retirement planning tool, creating a stream of income by using a large asset.
This type of mortgage is completely repaid whenever the borrower dies, moves from the residence, or sells it. Getting a monthly check from the bank is a nice perk, but people need to realize that they need to be 62 years of age or order to qualify.
Reverse mortgages sound great, but there are times when they are a good option, and times when they are not. Here is a look at both scenarios.
When A Reverse Mortgage is a Good Option
Getting a reverse mortgage can be extremely powerful for those people who need more income on a monthly basis to fully enjoy retirement. For the vast majority of people, their largest personal asset is going to be their home. Since retired people usually have their home paid off, the reverse mortgage can be used in their advantage to help pay for monthly bills and keep their home.
The amount of money a person will receive from a reverse mortgage is dependent on a number of factors. Everything from the value the home, to the age of the person, to current interest rates will be considered.
Every single company (including my company, LendPlus) that offers a reverse mortgage will try to provide the best value possible for potential clients. They know that it is a competitive market, so in order to get a person on board, they need to come up with the best option possible.
Individuals who really just need that extra income will benefit most from a reverse mortgage. It helps to not be completely desperate, but sometimes that is where people find themselves. Those who are not desperate can hold out for just the right type of monthly payment before officially signing up.
When a Reverse Mortgage Isn’t a Good Option
The upfront money might sound great, but there is more to the picture then that at times. There are a lot of costs that go into a reverse mortgage, and those people who do not want to deal with that extra cost might want to look elsewhere for additional income.
Costs include interest rates, loan origination fees, appraisal fees, title insurance fees, closing costs, and more. This can be tens of thousands of dollars in some cases, but the good news is that these fees will just become part of the loan.
If a person plans on moving relatively soon, a reverse mortgage might not be the right idea either. The loan will have to be paid back if the move is permanent.
Finally, a reverse mortgage will decrease equity of nearly every single home. That means less money will be left for those people mentioned in wills if a person ends up passing away.
How to Apply for Reverse Mortgage
There are certainly a lot of advantages overall when it comes to taking out a reverse mortgage. For those who are interested in finding out more, or applying for a reverse mortgage right now, my company LendPlus is one of the top companies out there. Our official website is Lendplus.com.