Helping Senior Homeowners achieve Financial Stability
If you are going to get a reverse mortgage, you first must know, and be comfortable with, the disadvantages of a reverse mortgage. With a traditional mortgage the borrower pays down the debt over a set term, usually 30 years. Conversely, with a reverse mortgage, the borrower builds up debt while they live in the home.
In addition to building up debt, there can be significant up front costs when brokering a reverse mortgage. If you plan on only taking out a small portion of money or plan on living in your home for only a short time then these costs can push the effective rate on the home up considerably.
The last significant disadvantage of a reverse mortgage is that you leave your heirs with a noticeably smaller legacy. It might be something you should discuss with your heirs. When you take out a reverse mortgage, you will have less equity in the home and likewise, the heirs will inherit a smaller portion of the home’s value. Also, the longer you live in the home, the more the interest builds up, which further lessens the equity you have in the home.
What are my current financial needs?
Everyone, no matter the age, needs to assess their budget and the best ways to effectively manage their financial needs. The easiest way to do so is by going through last month’s (or any average month’s) bills. You should include everything you regularly spend money on. Where are the bulk of your expenses? Do you need to adjust your budget?
CAN I adjust my budget?
This will vary from person to person and household to household. There are many ways to cut down your expenses such as different grocery stores, paring down unused or unnecessary things, going out to eat, having premium cable, club memberships, etc… If you are unwilling to sacrifice some of those things that you’ve become accustomed to, how much more money will you need?
It would be wise to consider for how long the equity in your home can satisfy your budget.
Am I willing to move?
Importantly, there are other options for increasing cash flow other than a reverse mortgage. Moving is the most common of those options. It can be very hard to think of leaving the home you worked so hard for or raised your children in, but sometimes moving is inevitable. With the proceeds, you can decide to rent a home or purchase a smaller home. Maybe a condo or townhouse is appropriate. Many seniors need to evaluate whether their current home is a suitable living environment. Getting around can be difficult as you age and a large home may not be the right choice for you. Selling your home is an excellent option if assisted living is a near-term possibility.
No matter what the decision is, those interested in reverse mortgages need to gage their current home situation and decide whether moving is a better option for them.
What do I plan to gain from a Reverse Mortgage and is this realistic?
This is an important question to ask yourself. You need to find your own motives for wanting a significant influx of cash. There are significant advantages and disadvantages of reverse mortgages. You have probably already decided how you would want to spend the money, whether it’s to pay bills, meet monthly expenses, or remodel the kitchen, but it is very important to realize the interest you will be accruing. When you ask yourself this question, you should find your true motives and whether other options should be examined.
If you are comfortable with the disadvantages of a reverse mortgage, you should speak with a reverse mortgage lender to discuss your specific situation.
Reverse Mortgage GRP does not shy away from the disadvantages of a reverse mortgage. They are important to understand.
Reverse Mortgage Facts
Many people believe that a reverse mortgage is a good way to obtain cash if you have your home paid off. This is absolutely true. However, a reverse mortgage is also an excellent way to pay off your existing mortgage. A reverse mortgage has the power to not only provide cash for uses such as home improvements, vacations, healthcare, taxes, and gifts, but it can, in fact, save you thousands of dollars a month by eliminating your current mortgage payments.
Some individuals ask if they can get a reverse mortgage, then continue to make payments on their existing mortgage. The answer is no. Reverse mortgage lenders will not permit this to occur. This, in essence, would amount to a second mortgage. Remember, a reverse mortgage is a loan. It is a loan which does not come due until death or permanent move, but it is a loan nevertheless. It is not free cash. If it were free cash, you rightly wouldn’t trust it anyway. Therefore, the current mortgage must be satisfied in full at the time you get a reverse mortgage. And a reminder, reverse mortgages are only for individuals 62 years of age and older.
Reverse mortgage lenders will facilitate this process for you. Furthermore, the right reverse mortgage lender will be able teach you what you don’t quite understand, as well as make sure you are comfortable with your decisions the entire way through the process. These individuals are not all the same. Make sure your reverse mortgage lender is reputable, has a great deal of experience, and works with a good company. Many are new to the industry. It is probably best to let them learn on another client. Stick with experience.
The reverse mortgage business is highly regulated. The fees between lenders do not vary nearly as much as they do in the traditional mortgage marketplace. Reverse mortgage lenders, therefore, compete on service, knowledge, and experience. One of the marks of a good reverse mortgage lender is the ability to make you understand and help you feel comfortable in your decisions. Investigate your options. A good place to start is the reverse mortgage page. Being an elder should have its advantages.
Reverse Mortgage Article
Helen, in late 2003, was about two years removed from losing her husband Edward. She had not handled the family finances and was overwhelmed when faced with dealing with bills, monthly income, mortgage payments, and savings. There was only about $8,000 in savings at the time of Ed’s death. Furthermore, Helen’s monthly income was about $1,600 and the mortgage payment remaining on the home was just under $800 per month.
Finances were, needless to say, tight. Her only son lived up north, and tried to be helpful, but certainly was not in a position to give Helen money. Aside from having to clip coupons and live very frugally, Helen knew that going on her women’s group cruise to Alaska in late summer of 2004 was not possible. Not possible until she discovered a reverse mortgage.
She saw a commercial on television and immediately assumed that a reverse mortgage wouldn’t be available in her situation because she still owed about $42,000 from a home equity line of credit that was taken out about six years before her husband’s death. Also, she didn’t know much about FICO score, but she was pretty sure hers was mediocre. She decided to call anyway to see what might become available for her in the future.
She found out a couple of important things when she called:
• The home doesn’t have to be paid off
• The reverse mortgage could actually pay off the existing mortgage
• Credit and Income don’t matter with a reverse mortgage
I hope this help you in your decision
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