If you’re at least 62 years old and have significant equity in your home, you might be considering a reverse mortgage loan. You may be wondering if a reverse mortgage loan is the best option for you.
There are some questions you may want to discuss with a trusted friend, family member or financial adviser before you move forward with a reverse mortgage loan.1
1. Is there another way to reach your financial goals?
Before you tap into the equity in your home, can you increase your income in another way or decrease your expenses? Are you willing or able to take a part time job? Would you be willing to downsize to a smaller, more affordable home? You can also look into state or local resources to help you lower utility and other bills.
2. Are you on a fixed income?
If you have few sources of other income, a reverse mortgage loan may not be your best option. You are still required to pay property taxes, insurance and any home owner association fees when you get a reverse mortgage loan. If you fail to pay these, you could end up foreclosing on your home. Downsizing to a more affordable home may end up saving you more money without tapping into your home equity.
3. Do you need to tap into your home equity?
Before tapping into your equity, it’s best to first consult with a financial adviser. Obtaining a reverse mortgage may not be the right fit for everyone, depending on your situation. Speaking with a financial adviser about your current financial situation and goals will help them determine the best course of action for you.
4. How long do you plan to live in the home?
A reverse mortgage loan is often best for people who plan to live in their home for a long time. Reverse mortgage loans can be expensive if you are only planning to live in your home for a few more years because you are required to pay insurance premiums, as well as other costs. The longer you stay in your home, the more likely you are to see the benefits from these costs.
5. Do you have children or heirs?
Taking a reverse mortgage loan may jeopardize your ability to leave your home to your heirs, as the loan is most often repaid through the sale of the home after the borrower passes away or moves out. If you do have children, it may be a good idea to discuss your plans with them prior to taking a reverse mortgage.
6. Will your spouse or partner want to continue living in the home after you pass away?
The loan becomes due after the last borrower on title passes away or moves out of the home as their primary residence. However, new guidelines recently implemented by the Department of Housing and Urban Development (HUD) allows a non-borrowing spouse (NBS) to defer the due and payable status of the loan if the NBS qualifies and meets certain obligations. You should discuss your options with a trusted adviser as well as with your loved ones.
Reverse mortgage loans can be financially beneficial for homeowners who have sufficient equity in their home and need another source of supplemental income. If you are considering a reverse mortgage loan, speak with a trusted friend, family member or financial adviser to discuss all of your options.
For more information about reverse mortgage loans call 1-800-976-6211. Or use our reverse mortgage calculator and determine how much you may be eligible to receive!