4 Factors to Pay Attention to When Considering Reverse Mortgage
Nobody is reticent when it comes to taking out a mortgage to purchase a home. Still, there are many controversies associated with reverse mortgages. But, one must also see that the benefits regarding the same certainly outweigh its drawbacks. A reverse mortgage lets you stay in your abode, rent free and you can still use some of the money that bought that home in the first place. But, in order to do that, you need to do some due diligence to ascertain if that’s the right step for you.
Here are some factors to consider.
A reverse mortgage lets you use the home equity for the extras like an annual vacation, new car or home improvements. The flexibility derives from taking out the equity in a lump sum, fixed monthly payments, line of credit, or any kind of combination. Making the most of online calculators will help you determine how much you can get when you add your age, home value, zip code, and current mortgage balance if you have one.
- Non-recourse financing
In other words, the total amount you owe can never be more than the current value of home. When the home has been sold away and after you pay off the reverse mortgage, the remaining proceeds will be applicable to you as well as your estate.
- Fishy sales tactics
If someone is persuading you to take money out of your property to purchase a product that will render them a commission like an annuity, then avoid it by all means. Many people suggest these plans like they are not professional financial planners. They are merely salespeople, one trick ponies and their tricks are always in their favor and not yours. There are many cases in which it may make sense to you by using your home equity to gain some other investments, however those strategies bear extra risks and should only be used by sophisticated investors who can understand and can afford the consequences.
- Be wary of moving after taking a reverse mortgage
Just like every other mortgage, there are many fees and expenses involved when you take a reverse mortgage. Instead of paying these out of your pocket, these fees are just added to the balance of the loan. You might want to amortize these expenses in the long run and for the longest period if possible. If you are planning to move in the next 2 or 4 years, seek less expensive ways to borrow money before you take a reverse mortgage.