If you are thinking about meeting some reverse mortgage lenders, you have undoubtedly done some research or know someone who already has one. For homeowners aged 62 and over, reverse mortgages are a great method to turn their home equity into cash that may be used for additional retirement money, home improvements, or medical costs. Reverse mortgages enable homeowners to maintain ownership of their property while living in their house during retirement. You receive a payment from the mortgage company as an advance on the equity in your house rather than making regular mortgage payments. Generally speaking, the funds are not taxable and have no impact on your Medicare or Social Security benefits. A win-win situation, yes? It is possible. Before obtaining a reverse mortgage, there are a few crucial factors to take into account.
There Are Expenses.
Reverse mortgages have charges just like regular mortgages do. You can anticipate paying origination fees and closing costs at closing, just like with mortgages. Additionally, there can be extra monthly servicing costs for the loan. You can also be required to pay mortgage insurance, depending on your lender and the reverse mortgage type. If you have any questions concerning the charges associated with your reverse mortgage, ask your loan officer before closing.
Responsibilities Of The Homeowner
Some of the same responsibilities that regular homeowners have while using a reverse mortgage still fall to the homeowner. The homeowner is in charge of making sure that property taxes are paid because they are not covered by the loan. Additionally, you must get, maintain, and pay for homeowner's insurance. The property owner is responsible for maintaining it appropriately and keeping it in good condition. The lender may demand loan payback if you don't comply with any of these conditions.
The Heirs May Be Affected
The assets available to your heirs will be diminished if the amount you draw from a reverse mortgage exhausts your equity. If your heirs choose to keep ownership, they can buy the house by paying off the loan. Your heirs would typically only have to pay the appraised value to buy the house, even if the balance owed exceeds the value. Be aware that a reverse mortgage must be paid off by giving the property back to the lender, selling it, or purchasing it if you want to leave the family home to your heirs.
Defense For Spouses
Even if your spouse did not sign the loan documents, they can typically continue living in the house if you pass away with some federally insured reverse mortgages. Since they are no longer obligated to make payments, though, they will no longer do so. Until the spouse passes away, sells the home, or vacates, the loan is not due.
While some reverse mortgages have variable rates, others offer fixed-rate loans. Be advised that the variable interest rates on your loan will change in accordance with the market. You must frequently take your money out in one large sum for fixed-rate loans. As long as the loan is outstanding, the interest is not tax deductible either.