How Do I Decide Between A Reverse Mortgage and A Regular (Forward) Mortgage?

As with any financial product, you need to be armed with all the facts before making a decision. Be sure you are getting your information from a reputable source and weigh the pros and cons of each. A frequently asked question from both seniors and their family members is, “Shouldn’t we just take out a regular refinance rather than a reverse mortgage?”

When I hear this question I am almost certain that the borrowers have not done a lot of research into the differences between a reverse mortgage and a “regular” or “forward” mortgage. We have limited space here, but let’s hit on a few of the highlights:

- What is the purpose of the loan? (If the borrower is having trouble making the mortgage payment today, a refinance may not be the best choice and may only lead to trouble later on)

- Does the borrower qualify for a forward loan? (What about credit scores and income — also what is the impact if the borrower becomes ill or there’s a loss of income due to the death of one spouse?)

- Is the loan needed for a short term? If so, a home equity loan may be a better choice.

- What are the borrower’s long term goals for the property? Is the plan to remain in the home for many years to come, and is it an expectation of the heirs that the property will be left to them?

Once these basic questions are answered, the solution will most likely present itself. In many cases a reverse mortgage may be the best choice, but careful consideration of all factors is recommended.

If a reverse mortgage is appropriate, then the best advice — as with any financial vehicle — is to consult with experienced reverse mortgage lenders in addition to family members or other trusted advisors to determine if a reverse mortgage is the right choice for you.

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Contributor Sue Haviland, based in Baltimore, MD has been a reverse mortgage specialist for more than five years.

This entry was posted on Sunday, January 20th, 2008 at 3:44 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.