Reverse equity mortgage is an option that has grown exponentially in the past few years, especially among retirees. But just because it's popular doesn't mean it's also the right fit for your financial situation. The basic principle behind the reverse mortgage is to convert your home equity into income without selling. Instead, your lender makes payments to you and, in return, you can keep your home. You don't have to repay the loan until your property is sold.
It may sound too good to be true, which is why it's important to explore all of your options first. Before jumping into a reverse mortgage situation, ask yourself the following questions:
1. What are your reasons for needing a reverse mortgage? How would you spend the money you would receive? Weigh the costs of the loan against your intended purposes.
2. Can you afford the loan? Depending on your reverse mortgage rate and the type of loan you choose, the amount you owe may increase each month.
3. Do you expect your financial needs to change dramatically in the next few years? If you're not in a current financial crisis, it may be best to wait on a reverse home mortgage.
Find a reverse mortgage broker or lenderYou can find reverse mortgage options at almost every bank or financial institution. Make sure you choose a lender with a good reputation, someone with whom you feel comfortable. Don't be afraid to ask questions and shop around for the best rates, types of loan and start-up fees.
Educate yourself on the facets of a bank reverse mortgageMortgages can be complicated and a reverse mortgage is no exception. When considering a reverse mortgage, it may be helpful to learn more about the advantages and disadvantages as well as the different loan types and other basics.
Use online tools to help you finance reverse mortgagesFrom reverse mortgage calculators to financial evaluations and more, many online tools exist to help you with your decisions. Having all the information and resources available to you will help you decipher the best options for you.
- Talk over the reverse mortgage loan you are considering with a trusted friend or relative, or a lawyer you respect. A second opinion might open your eyes to something you have missed.