Reverse mortgages are an option for homeowners who are 62 or older and are facing financial hardship. It's a way to tap into the equity in your home, but there are some risks involved. In this video, I'm going to talk about the pros and cons of reverse mortgages. What you should look out for, what are the many benefits, but also what you should know before you sign on the dotted line. They can be good for some, and not so good for others. Watch this video till the end to get the complete picture about reverse mortgage.
INTRO
Reverse mortgages are a way for homeowners to get access to money without having to sell their home or take out a loan. They're only available to seniors who own their home and live in it as their primary residence.
THE PROS
The pros of reverse mortgages are that they don't require you to make any payments until you sell your home or die—and in some cases, you can continue living in your home while receiving payments from the bank or mortgage lender. They also allow seniors with limited income to get cash when they might otherwise be struggling financially.
Reverse mortgages are a way for seniors to tap into the equity in their homes. As you get older, your mortgage gets smaller and smaller, so the amount you owe shrinks, even though your property value keeps going up.
This can make it hard for seniors to sell their homes and downsize or relocate, but with a reverse mortgage, you get one lump sum of money that's yours to spend on whatever you want—from paying off your home loan or moving into assisted living. It's a way to get that extra cash without having to sell your home.
A reverse mortgage is not the same thing as a traditional mortgage. With a traditional mortgage, you're paying back over time (usually 30 years), but with a reverse mortgage, there's no monthly payment required—just one big lump sum when you decide you want it. And if you don't use it all up during your lifetime? The remaining balance will go back into your estate when you pass away and be left behind for whoever inherits it after that happens (or they can choose not to accept any of it).
THE CONS
But before you decide whether a reverse mortgage is right for you, there are some things you should know.
First, these loans are not free: they come with fees that can add up over time. And because they're secured by your house, if it has to be sold due to foreclosure or other events like bankruptcy, then you'll lose not only all the money you've put into it, but also any equity in your home as well. Also, reverse mortgages often have high interest rates compared with traditional loans so they may not be worth it if you don't plan on staying in your home long enough for those savings to outweigh what you pay in interest each month or year.
Second, there are limits on how much money you can take out through a reverse mortgage—and if those limits aren't enough for what you need, then you won't be able to use one at all. So if you think this might be something that could help with whatever financial situation is currently stressing out your wallet right now? It's best to look into what options are available before deciding anything!
IS THIS THE RIGHT LOAN FOR THE RIGHT BUYER?
There are some key things you should know before deciding whether a reverse mortgage is right for you.
First, make sure you understand what happens when the loan is paid off. You may not have to return the full balance at once—but if that's the case, there may be fees and penalties involved in paying off your loan early. And if you don't want to keep paying your mortgage after it's paid off, remember that there will still be taxes and insurance on the house—which means it could go up in value over time!
Second: Find out what kind of interest rate they're offering. Some lenders offer very low rates because they believe they'll get their money back before they even need to pay those low rates; others offer higher rates because they think they might not get their money.
Third, if you already have a mortgage on your home, it will be paid off first before any money is given to you. This means that if your house goes up in value while you still owe money on the mortgage, that increase won't benefit from a reverse mortgage!
Fourth, if you don't have enough equity in your home to cover all costs associated with buying back that equity after death or disability (known as "deeming"), then your heirs might not receive full benefits under HECM (Home equity conversion mortgage) until they sell their home or refinance it. HECM is the only reverse mortgage insured by the U.S. Federal Government, and is only available through an FHA-approved lender.