Reverse mortgages. It’s an increasingly popular term; you may have seen a commercial touting the benefits of one or seen a brochure at your local bank. But what exactly is it? Are there risks? Is it right for me?
Consider a Reverse Mortgage an opportunity for you to decide how you wish to live out the rest of your life. You may choose to live more comfortably month to month, enjoy some luxury, or even pass some money along to your heirs for their use now while you are still living.
Now, the money lent to you can be in one lump sum or monthly, depending on your situation. If you are struggling to get by, a reverse mortgage will take the equity in your home and give it to you as cash. Equity is the amount of money left after subtracting your mortgage’s current value from the appraisal value of your house. For instance, if your house is appraised for $300,000 and you have $50,000 left on your mortgage, your equity is $250,000. Thus, with a reverse mortgage, you are entitled to a portion of that equity. The bank issues a monthly payment to you or you may receive a one time lump sum. There are no monthly payments from you back to the bank like a typical mortgage.
Reverse mortgages do have their consequences though. What you should know is that this big loan given to you by the back is accruing interest. Obviously, this will increase the amount owed upon maturity of the loan. This fact compounds one of the other stipulations of a reverse mortgage, which is the amount of succession you leave to your heirs. If you have planned on leaving your heirs with some financial security, this may not be the right course of action for you.
So if you are 62 years or older and this sounds like a good fit for you, then why wait? Start the process now! It is mandatory that before you sign anything, you attend a counseling session with a HUD certified counselor. This person is an objective and independent financial advisor that will explain everything to you in detail and answer any of your questions. HUD is the government’s Housing and Urban Development department that protects homeowners. Please see this link if you want more information on HUD.
Take that equity that you’ve put so much time and energy into and put it to use today
About the author: Patricia Lovett is a Realtor at RE/MAX Legacy and is part of the Alliance Home Team. Contact her directly on her website www.pattylovett.com