Is A Reverse Mortgage a Good Idea? Should you really be considering the HECM option for your retirement? Is it a good idea for a senior to get a HECM loan? Let’s find out.
There are many factors which need to be considered to answer this question, we will cover everything on this page about whether or not you should be considering a reverse mortgage.
Top Reasons why a reverse mortgage loan rocks and its a good idea for you.
1.) Ability to access equity without selling your home.
2) Ability to set up a credit line that grows over time.
3.) Ability to receive monthly income that is guaranteed for life.
4.) Only program that can eliminate your monthly mortgage payment.
5.) The longer you live the more guaranteed income at times exceeding your homes value – can be a very good return on your home equity with no risk.
6.) Income is tax free that can be very substantial in your retirement when you are living off fixed income.
7.) Access to your equity can mean paying off any high interest loans freeing up even more income.
Factors you need to take into account for your retirement:
§ your age ( the older you are the more equity you can take out, longevity is the biggest risk in retirement, how long will you live? this is a tough question to answer – therefore the reverse mortgage allows you to receive lifetime monthly income for life eliminating this risk ( a smart option for sure).
§ love your home? – do you plan on staying there for long term, if so this is a smart decision as there are costs to the program, and those who live in the home for at-least 5-10 years get the full benefits ( no payments – and home price appreciation so when they sell they can be in the positive equity territory).
§ how much equity is available ( important for qualifying into the program, also should dictate the option you select to receive the income/funds – the more equity you have the more risk you can take -you can take out a lump sum – and invest some of the money which would offset the borrowing costs).
§ closing costs and interest rates – currently all of the lenders/banks we work with all aggressively pricing the loans with favorable terms for the seniors – low interest rates and no closing costs/fees – by comparison shopping we are able to compare apples to apples and scure you a great loan.
§ your other investments – if you have a portfolio of investments you need to balance it with the reverse mortgage, depending on your retirement strategy we can help you make a general plan of which assets to hold etc ( your financial planner can also advice you )
Factors alone are not enough to make this decision, we tell customers that a round financial analysis is needed – how much liquidity do you have with your investments – do you have another property – income? only social security or do you receive a pension – how aggressive is your investment strategy in your retirement? these are just some of the though questions you need to review – if you are using the reverse mortgage to simply give you more money before you decide to sell in a few years you probably dont need to over-think – but if your home is your only asset this is a huge decision and needs to be taken seriously.
Reverse mortgages are sometimes the only option that will allow a senior to tap into their home’s equity without having to sell the home. A cash out refinance is usually out of the question since seniors will find it difficult to qualify based on the income and credit scores.
Media has the perception that reverse mortgage closing costs are expensive but compared to what ? Selling the home will likely lead to real estate fees which can add up to over 6%, and you will most likely have to purchase another home.
“While reverse mortgages are not for everyone, seniors who qualify and want to take equity out of their homes, this is the best way of achieving that goal since you wont be responsible for mortgage payments either ( plus there aren’t many other options besides selling ( when you sell and buy you can incur up to 10%+ in fees – very expensive).”
4 requirements to qualify for reverse mortgage
Who Can Qualify For a Reverse Mortgage Loan
§ must be 62 or older
§ must own the home
§ must have equity available in the home
§ never have paid late or defaulted on government debt
§ must be your primary residence