Factors You Should Consider Before Taking a Reverse Mortgage?
Pay heed and consider the following aspects before heading in for a dive in the reverse mortgage:
- Your heirs
One of the key advantages of reverse mortgage is that most cases are to apply for a loan that doesn’t have to be paid back in any way until death. But, if the home is sold away before the death of the borrower, the loan must be repaid at that time. If the heirs wish to keep your property, they will have to find other means to pay off the loan. If the proceeds from the property sale is unable to cover the loan payment, they will also need to find other means to fill the gap or forget about owning the home and walk away.
- Are you eligible?
In order to be eligible for reverse mortgage, you will need to have a substantial amount of equity in your home. Your home must also be well-maintained and existing on payments. If your house is in a poor condition, you will not be eligible for a reverse mortgage as the financial institution providing you the loan may not be able to retain their money back out of the loan. If you have already taken in the reverse mortgage, and are delinquent to pay your property taxes, you will be needed to pay off your loan back in full immediately. Contact your mortgage broker for more.
- Spouses and partners
If you have a spouse or a partner living with you, they will be forced to move if their name is not listed in the loan as it is due and the borrower sells away the home or dies. In other words, it is important to consider putting your partner’s name in the loan as well.
Types of Reverse Mortgage Loans
- Single-Purpose Reverse Mortgages
They are cheap loans used for particular purposes like paying for necessary home repairs or property taxes. These are offered by government agencies or NPOs and don’t require monthly repayments.
- Home Equity Conversion Mortgages:
The HUD provides home equity conversion mortgages that can be used for any purpose with zero income limitation or medical needs. They are popular and expensive with high upfront costs.
- Proprietary Reverse Mortgages
These are available to the homeowners who have high-value homes which are worth more than the federal lending limit. As these are not insured by the federal means, lenders tend to charge more fees because of lack of insurance.