What is a reverse mortgage ?
The reverse mortgage is a fairly new trend in the real estate industry; it is entirely different from the regular mortgage because reverse mortgages allow you to occupy your home payment-free as long as you hold ownership and reside on the house. While this type of mortgage requires you to pay a lump payment plus interest when you leave the house, this can be a good option for other people. If you’re thinking of getting a reverse mortgage, make sure if it suits your needs. Answer these questions and evaluate if a reverse mortgage is right for you:
1) How long do you plan to stay? – To determine if reverse mortgage is what you need, think of your future and decide whether you plan to move out of the house in the coming years. This type of loan is ideal for people that have no plans of moving out.
2) Do you have dependents? – When thinking of getting a reverse mortgage, think about your dependents, such as your spouse or children. If you die, they would have three options – first, they could sell the house and pay for the mortgage; next they can give the keep the house and pay for the mortgage; or give up the house to the mortgage holder. If you wish to leave your dependents with plenty of money, a reverse mortgage is not a good choice.
3) How old are you? – Retired people with illnesses can benefit from a reverse mortgage because they don’t have to pay the money back as long as they live in the house. However, if you’re young and the possibility of moving between states may occur in the future, a reverse mortgage would only hurt your finances.
The great thing about reverse mortgages is that it requires no monthly payment. However, not everyone is suited for this type of mortgage, so make sure you understand everything about a reverse mortgage and if it could benefit you in the long run before closing the deal.
August 11th, 2008 at 3:53 pm
In addition to all the features pointed out above, there have been some great improvements made to the FHA insured HECM reverse mortgages with the passing of the Housing and Economic Recovery Act on July 30th, 2008.
A uniform national loan limit increase to $417,000. was implemented. And for high housing cost areas, the loan limit can go as high as $625,000. Additionally, loan origination fees have been reduced and prohibitions against cross selling insurance products, annuitites and other investments by those that originate reverse mortgages were also part of the housing bill amendments.
All of these changes make a reverse mortgage an even more appealing financial aid tool for seniors in need of tapping into their home equity to improve their retirement years.