You've undoubtedly done your homework or talked to a friend who already has a reverse mortgage if you're thinking about getting one. With reverse mortgage loans, homeowners 62 and above can access the equity in their homes to pay for things like retirement, necessary home repairs, or medical bills. In the case of a reverse mortgage, the borrower is able to keep living in the house long after conventional mortgages have become unaffordable. You receive a lump sum from the mortgage lender in lieu of regular monthly payments. This sum will not affect your eligibility for Medicare or Social Security and is not taxable. It seems like a win-win situation. That's certainly possible. Before applying for a reverse mortgage, it's important to think about a few key factors.
Expenses are a reality.
There are fees associated with reverse mortgages just like there are with a regular mortgage. Similar to mortgages, closing expenses and origination fees will need to be paid after the loan is closed. There could be monthly servicing fees added on top of the principal loan amount. You may also be required to pay mortgage insurance, though this will vary by lender and reverse mortgage product. If you have any questions concerning the fees associated with your reverse mortgage, be sure to ask your loan officer before closing.
Duties Of A Householder
Reverse mortgages don't absolve homeowners of all the responsibilities they normally have. Homeowners are responsible for making sure property taxes are paid in full as they are not a part of the loan. It is also incumbent upon you to get and maintain enough homeowner's insurance coverage. The homeowner is responsible for ensuring the property is well-maintained and stays in good shape. If you fail to meet any of these conditions, you may be asked to refund your loan.
Possible Impact On Heirs
Your heirs' share of the estate could be diminished if the reverse mortgage payments outweigh the value of your equity. In the event that your heirs wish to keep the house, they can do so by paying off the mortgage. For the most part, your heirs will only have to pay the appraised value of the home even if the amount owed is higher. Keep in mind that a reverse mortgage requires repayment in the form of turning over the home to the lender, selling the home, or purchasing it from the lender if the homeowner wishes to leave the home as an inheritance.
Marriage Protection
If your spouse did not co-sign the reverse mortgage paperwork with you, they may still be able to stay in the house after your death as long as the mortgage is federally insured. Since they are no longer a borrower, they will no longer receive loan payments. Repayment of the loan is deferred until either spouse dies, sells the home, or leaves the residence.
Consider Your Interest
Loan rates for reverse mortgages can be either fixed or variable. If your loan includes variable rates, be aware that they will change with the market. Fixed-rate loans sometimes require that you collect your money all at once in one single sum. The interest is not tax-deductible either until the loan is paid off.
0
