Reverse mortgage can be an excellent retirement tool for many homeowners aged 62 and above˳ It allows you to borrow cash against the equity that you may have built up on your home˳ Apart from supplementing your income, it also allows you to stay in your home for as long as you want to˳ However, there are many things you need to consider before taking out a reverse mortgage˳
The amount you get
The amount that you can get as a reverse mortgage depends on the kind of equity you have built up on your home˳ If possible you can get a home appraisal done to find out how much you are entitled to borrow˳ See if the amount suffices your requirements and then take your decision˳ The good thing, however, is that you will still have the title to your home for as long as you stay in it˳ Nevertheless, you will have to pay up your property taxes, homeowners insurance, and other charges to maintain your home, regularly˳
Payment options
When it comes to receiving funds from reverse mortgage you can choose from different options˳ You can get it as a lump sum, a monthly payment, or a line of credit˳ You can also try a combination of these˳ Consider your personal situation before selecting the right option˳ If you have any large one-time expense to cover, you may want to go for a lump sum˳ However, if you need the money for your regular living expenses, you will have to choose the monthly payment option˳ In case you need the money only for emergencies or additional expenses, you can think about going for a line of credit˳
Legislations
HUD keeps changing the rules for reverse mortgage every now and then˳ They may not affect existing borrowers˳ But as a senior homeowner who is thinking about taking out a reverse mortgage you may have to keep yourself aware of all these rules and regulations˳ According to the latest, HECM borrowers will have to now pay an initial mortgage insurance premium of 2% of their maximum loan amount instead of the 0˳5% that they were paying previously˳ This is regardless of how much amount you draw up front˳ However, the annual MIP of 1˳25% on the outstanding mortgage balance has now been reduced to 0˳5% for all borrowers˳ The borrowing limits have also been reduced when compared to what they were previously˳
Fees
There are many initial expenses associated with reverse mortgages such as loan origination fee, appraisal fee, mortgage insurance premium, and closing costs˳ They may come up to 3 to 4% of the loan amount and are generally financed into the loan˳ Apart from these, the lender might also charge some loan servicing fees˳ Many reverse mortgage lenders may get in touch with you via reverse mortgage leads˳ Check with all of them about the fees involved before you sign up an agreement with any of them˳
Repayment plan
Unlike the traditional mortgage, reverse mortgages do not require monthly payments to be made˳ They become repayable only after you pass away or move away from your primary residence˳ This is not an option that you should consider if you are thinking about moving away from your home five years from now˳ If you do, you will not be able to recoup the closing costs that you pay against the reverse mortgage that you borrow˳
Family opinion
Talking to your family members is very important before taking out a reverse mortgage˳ Your heirs may want to retain your home after you pass away˳ In most cases, the borrowers use up the entire equity when they take out reverse mortgages˳ And once the borrower passes away the home will have to sold off to pay back the loan˳ If the family members want to retain the home they will have to arrange for alternative means of financing to pay back the mortgage˳ Find out what your family members would want to do with your home before you take out your mortgage˳
Use
How you use the reverse mortgage will determine if you would benefit from taking one out˳ There are no restrictions on how you use your mortgage amount˳ You can use it for your ongoing living expenses, go for a family trip, or cover your kitchen renovation costs˳ However, you will still need a plan before you get the cash˳ Your age also matters when it comes to using the funds from this kind of mortgage˳ For instance, if you are still in your early 60s, you may want to avoid unnecessary spending so that you don’t run short of funds at a later stage˳
Alternate options
It will work for you if you are short on your financial resources and if your family members have no interest in retaining or inheriting your home˳ However, if you try seeing the bigger picture, you may find many other options˳ See if you have any other income or assets to sell˳ You may sell your home to your children, sell your home, refinance your existing mortgage or even decide to downsize and start living in a retirement community˳
Reverse mortgage is available for all homeowners who are aged 62 or above˳ However, it may not suit everyone’s requirements˳ You will have to find out if this is the right option for you before you decide to borrow˳ Make sure you are aware of the fees and legislation and have a definite plan for usage and repayment˳ Also look out for alternate options that suit your needs better than a reverse mortgage can do˳
This mortgage is a lifetime decision that can help you lead your retired life peacefully and comfortably˳ However, you may still want to make sure it is the right decision to make before you reply with a ‘Yes’ to one of the mortgage lenders who come to you via mortgage live leads˳
Source by https://ezinearticles˳com/?Top-8-Factors-To-Consider-Before-Taking-Out-a-Reverse-Mortgage&id=9974107
