First off, let’s understand what a reverse mortgage is. For those of you who don’t know, A reverse mortgage is a type of loan where the homeowner uses their home equity as collateral in exchange for cash. This type of program is open to retirees ages 62 and upwards. To know the value of your home, you can use a reverse mortgage calculator to give you a general idea for the basis of the amount. This loan is generally due when the owner dies, sells the property or moves out permanently. When the amount is due, the owner or heirs (if the owner has passed) will have to choose whether they would sell the house to pay off the loan balance or to pay the loan and keep the property. In the event that they choose to sell the property, any excess funds will be referred to the owner/heirs if the property value exceeds that of the loan balance. However, if the loan balance exceeds the value of the home, the owners/heirs are not liable to pay any other asset other than that of the property itself.
Things to consider
Now, before getting this loan, what are the things you should consider. Mainly, one point of importance is the value of the home itself, which will be determined by using a reverse mortgage calculator. Another thing is to take note of are interest rates and the monthly tax payments and insurance. During a reverse mortgage loan, your monthly mortgage payment stops but you still have to pay the tax and insurance of your home and keep the property in check through maintenance. So before taking this loan, try to consider your monthly cash flow, and determine whether or not this loan would be beneficial to you. One more point to consider is if your home has lesser appraised value than you expected or if it meets the standards of your state’s laws regarding this program. Many states vary in offers when it comes to their reverse mortgage loans and sometimes they also differ in appraisal, so it really is important to know the prices of your homes and use a reverse mortgage calculator to accurately gauge your property’s possible loan amount. One other thing is that you should also think long term since this will definitely be a long-term deal. Plus, you need to consult your family as well since your family will also be affected as well. In the event that a homeowner dies, the heirs will then take hold of the property, hence take hold of the debt as well. So talking to them and asking their advice will also be key in this. Plan this through, use a reverse mortgage calculator, check with the local agencies that offer the program, cross check it again with the reverse mortgage calculator, get the necessary paper works and plan your next move carefully.
Many have considered this type of loan and many have successful deals that have assisted them through this program. But I assure you, those that benefitted from this program, planned their financial moves carefully, have thought about it long and hard and decided if it was best for them to join this type of program. Follow the steps, learn more about the loan using a reverse mortgage calculator and make sure you are ready for the consequences.