6 Things to Consider About Reverse Loans and Refinancing

Are you still making monthly payments on a mortgage? If so, you may have wondered whether it makes sense to refinance your loan or try to get a reverse mortgage to get a better grip on your finances. Here are some things to consider before taking either step.

1. A housing counselor can discuss reverse mortgages pros and cons with you. A reverse loan counselor should also discuss other alternatives, such as refinancing or budgeting your money better.
2. Refinancing means you still need to make monthly payments on a mortgage. So you either need to continue working or have enough income saved up to pay on a home loan.
3. Reverse loans put money in your pocket. The amount you can borrow depends upon your age, home’s value, and mortgage rates. The money can be used for any purpose and doesn’t have to be repaid until you move or die.
4. Mortgage rates seem to be on their way up. Traditional 30-year mortgage rates could rise to 5.7% by the end of this year, according to the Mortgage Banker’s Association. Keep that in mind if you’re thinking of refinancing. If you wait too long to refinance, you could end up with higher monthly payments than you want.
5. You may not qualify for a cash-out refinance. Generally, only people with excellent credit, healthy incomes, and significant home equity can get such deals these days.
6. Reverse loans tend to have more fees than a refinance. Shop around to compare reverse loan deals to get an idea of the types of closing fees involved. You should also shop around for refinance quotes if you still think this might be an option.

When comparing all your options it’s important to look at the overall impact a reverse mortgage or refinance can have on your lifestyle. Don’t look for a quick fix. Deciding whether to use any type of loan requires careful planning for the long term.

This entry was posted on Monday, January 11th, 2010 at 2:30 pm and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.