Reverse Mortgage Loan Blog

Reverse mortgages: One of the most worrying of all to me, reverse mortgages, which allow older homeowners over 62 years of age to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a “reverse” mortgage, you receive tax-free money from the lender and generally don’t have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence.

Reverse mortgages can be a great way for older homeowners who are house-rich but cash-poor to stay in their homes, but boost their financial liquidity.

The catches …

A) Reverse mortgages have very high up-front fees, as much as 8 percent of the home’s value, plus monthly service fees.

So if you’re an older homeowner and you own your home outright, you might be better off taking out a home equity loan.

Even though you’ll have to make monthly payments to repay a home equity loan, in many cases, it can turn out to be less expensive than a reverse mortgage.

B) With a reverse mortgage (and also a home equity loan), you’re tapping the equity in your home and taking on debt.

So if you have any plans of leaving your home in your estate to your children or grandchildren, just keep in mind you might be jeopardizing that, or, leaving your heirs an encumbered property.

Many senior citizens are jumping at the opportunity to cash out some equity in their homes. For many, it’s a big help. But for many others, it’s nothing more than going deeply into debt and hocking your home.

So, think this decision through carefully before you entertain a reverse mortgage, comparing its costs to that of just getting a plain old home equity line instead.

Found here.

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