Getting a reverse mortgage can be advantageous for many seniors looking for some additional capital. But just because you are 62 years of age or older doesn’t mean you would automatically benefit from obtaining a reverse mortgage loan. Before you make this kind of financial commitment, you need to know if it's right for you.
Here are few "what ifs" to ask yourself to determine if a reverse mortgage is a good idea for you:
What if the property isn’t your primary residence?
You can only qualify for a reverse mortgage if the property in question is your primary residence. Those looking into financial options for their vacation homes, for instance, may want to consider alternative choices, such as refinancing your home. You should consult a mortgage specialist to find out what your options are based on your own circumstances. Their professional opinion could prove priceless.
What if you plan on staying in your home for a long time?
The whole point of a reverse mortgage is to access your home’s accumulated equity. The loan comes due when the borrower dies or move away. So if you plan on staying in your home for a while, then this type of loan could be very beneficial. On the other hand, if you’re thinking about putting your home up for sale in the next couple months, this option may not be the best one for you.
What if your kids are interested in keeping your home?
One of the advantages of getting a reverse mortgage is that you get paid rather than you pay the bank or the mortgage company. After the reverse mortgage receiver dies, the heirs are responsible for paying back the loan. Often it means selling the property. If the home sells for more money than the amount owed on the reverse mortgage, the heirs receive the difference. If the home sells for less, they won’t have to pay a cent. Consequently, those who are willing to sell the property will have an easier time paying back the loan. That is, unless the heirs are financially capable and willing to pay off the loan themselves.