Listed below are several questions that every prospective reverse mortgage borrower should consider prior to applying.
Do you need to tap into your home equity now or should you save it for an emergency?
Tapping home equity is a big decision. In the past, many homeowners were advised to save equity for emergency situations. But recent studies published in the Journal for Financial Planning suggest that tapping equity earlier and retirement funds later might be a better strategy for extending the life of your assets. Setting up a credit line for future use can be a great way to protect yourself from downturns in the real estate market and ensure that the equity you have today will always be available if you need it in the future.
If you are only need funds for a one-time expense, such as a new roof, you may find other programs that are quicker and/or less expensive then a reverse mortgage.
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.
Are you on a fixed income with no other assets?
You will need to be certain that your income allows you to keep up with your obligations – if you take out a reverse mortgage loan and then have trouble paying your property taxes and homeowner’s insurance, you could face foreclosure.
How long do you and your family plan to live in the home?
In most cases, a reverse mortgage makes more sense if you plan to live in your current home for a long time. The FHA insurance, which is there to protect you and the lender in case your loan balance ever grows to be more than your home is worth, carries an up front premium. That premium and the closing costs associated with any home loan can make reverse mortgages an expensive way to borrow money if you don’t plan to stay in your home.
Does your spouse or partner want to keep living in the house if you die?
Discuss this question carefully with your spouse/partner. If either one of you are a co-borrower, both you and your partner will be able to keep living in the house even if one of you dies. If you take out a reverse mortgage without your partner as a co-borrower, then your partner will have to repay the loan or take out their own mortgage (reverse or forward) to remain in the home.
Do you want to leave your home to your children?
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.
Reverse mortgage loans can be financially beneficial for homeowners who have sufficient equity in their home and need another source of supplemental funds. If you are considering a reverse mortgage loan, speak with a trusted friend, family member or financial adviser to discuss all of your options.
If you decide to pursue a reverse mortgage, we invite you to call us toll-free today at 1-800-486-8786 and experience the difference working with America’s Most Trusted Reverse Mortgage Company.