Should You Get a Reverse Mortgage or Become a Renter?
January 7th, 2010
- Should you become a renter or get a reverse loan?
- Discuss Reverse Mortgage with Heirs
- Exchanging Home Equity for a Reverse Mortgage
- Tips for reverse mortgage heirs
- 4 Myths About Reverse Loans
Reverse mortgages have helped many seniors stay in their homes. But in some cases it may make more sense to sell your home and become a renter. Here are some things to consider when making this big decision.
Reverse Mortgages Pay You Cash
A reverse mortgage loan puts money in your pocket and lets you keep your home. The cash can be taken in a lump sum payment or in installments. Becoming a renter means you have to make monthly payments to a landlord. Even if you sell your home and expect to use the proceeds to pay for housing costs, you need to budget your money carefully. Your income must stretch to cover rent and other expenses for the rest of your life.
Rental Prices Have Declined
U.S. apartment vacancies are at a 30-year high, causing some landlords to lower rental rates to attract tenants. As a renter you may have more negotiating power now to get an affordable lease and other incentives. Rents dropped 3% last year, according to data from Reis Inc., a New York research firm.
Reverse Mortgage Heirs
Keeping your home with the help of a reverse mortgage means you have something to leave to your heirs. While a reverse loan must be repaid after you die, your heirs can choose to keep the property or pocket the proceeds from selling it after the loan has been repaid. Obviously, you can’t leave a rental apartment to your heirs.
Reverse Mortgage Pros and Cons
A reverse mortgage counselor can help you learn more about the pros and cons of this type of loan. A knowledgeable counselor should also discuss other alternatives to getting a reverse loan, such as renting or assistance for the elderly that is available through community agencies.