Exchanging Home Equity for a Reverse Mortgage

All decisions involve some sort of trade-off. With a reverse mortgage that trade-off is giving up some of the equity in your home for the convenience of having cash now. Consider the following reasons why this may or may not be a good idea.

• Owning a home free and clear is a dream that many people share. Not having a monthly mortgage payment frees up income for other expenses, such as medical bills, hobbies, or travel. A paid off home also can give you a sense of financial freedom. Reverse mortgages don’t have to be repaid until you leave your home, however, so you won’t have to make monthly payments.
• You can apply for a reverse home mortgage at the age of 62, which means that there is a potential to outlive the proceeds of the loan (unless choose to receive monthly payments for life, or tenure). The average life expectancy in the US is 77.9 years, according to the Centers for Disease Control and Prevention. Women on average outlive men. Before borrowing with a reverse mortgage, work with a housing counselor to assess the current state of your finances. It’s important to know exactly how a reverse loan may or may not help you.
• Have you thought about any reverse mortgage heirs who might have to settle your estate? Borrowing against your home equity means that you may have less to leave to your kids. They would have the option to pay off the reverse mortgage if they want to keep the house or sell the home and pocket any profit made in the deal. They also could choose to do nothing and let the reverse mortgage lender take the house.

You can get more information about reverse mortgage guidelines by talking with a housing counselor. You can also search for reverse loan quotes here.

This entry was posted on Thursday, August 19th, 2010 at 2:14 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.