What does it mean to have a reverse mortgage?  Who is eligible? What does it take to get one and is it really worth it?

It is actually a loan given to someone 62 years of age or older. Would you do is give up a portion of the equity in your home and then receive the loan either in a lump sum or in monthly payments.

The major difference to me is with a regular mortgage as you make payments the balance of the loan decreases. With a reverse mortgage the balance of your loan actually increases because of the higher interest charges.

How Does It Work?…..

There are no required fixed monthly mortgage payments. The loan will be paid when the borrower moves out or dies.  If you pay off the loan ahead of time and the balance is less than the value of the home then you or your heirs will receive the difference.

Many people use it to supplement their retirement income. The additional income helps to allow people to remain in their homes. Sounds great doesn’t it? Could it possibly be too good to be true?

You will receive monthly bank payments based on a percentage of your equity. There are no requirements as to how you are to use your new income. You can, if you so choose; pay all outstanding debts including medical bills or any home improvement.

How much are you Eligible for?

The Borrowers age is a factor reaching to the youngest spouse. Obviously the younger you are the less monthly payment you will receive because you will be eating up more of your equity. Realize that the appraised value of the Home is another factor.

Therefore your age plus the value of your home determines your new monthly income. This amount cannot exceed the HECM (home equity conversion mortgage) mortgage limit of $636,150.

Is It Really a Good Idea?

I am not so sure. Think about this. The reverse mortgage companies paint a real good picture; but beware. You are no longer in total control. You cannot move and it must be your primary home. I would like it for one reason and one reason only perhaps as a “LAST RESORT” only. If it comes down to losing your home and there are no other alternatives than by all means go right ahead.

Remember anyone living with you who are not on the loan at the time of your death must move. It could be a family member who can no longer stay in the home they were raised in.

If you borrowed money for medical reasons that could be a very bad idea also. Here is why this could be dangerous.  What if your condition gets worse?  Remember this is to be your primary residence but if you are out of the home for whatever reason more than 12 months the bank will “FORCLOSE” and take possession. Also, when I die they must “FORCLOSE” to take my home. That word “FORECLOSURE” makes me feel very uncomfortable also.

I am sure.  Other than we don’t want to lose the home we would truly desire to leave it to someone we….”LOVE”. Once you start taking money you will pay in some way and not always in your favor. There will be closing costs and fees which could be thousands of dollars which you will pay for somehow from the money borrowed. A reverse mortgage is expensive.

What If?

Perhaps there might be other alternatives. Perhaps you could not apply for a straight refi mortgage because of your poor credit or lack of sufficient income. That would be so much more of a savings. You could also downsize to something more affordable thus avoiding some of the financial stress. How about we consider a small condo or even a rental of some sort. Maybe rent a room in someone else’s home. Just think.

 You could however have family, friends or someone move in with you.  What if the family you were going to leave it to could instead move in with you? Now they share the monthly expenses and you get to stay in your home. There is no cost to you and best of all you are NO LONGER LONELY.

Wouldn’t you possibly feel better and happier knowing you will no longer be “ALONE” or worrying about finances? Tell me what good is a “HOME” when there is nobody there to share it with. I don’t believe we were ever meant to be truly alone.

I understand there are always exceptions to the rule. You might prefer to be alone. If that be the case than why not since you are alone move to an apartment complex where you don’t have to worry about maintenance or paying property taxes.

My opinion is to avoid reverse mortgages except as a “LAST RESORT”. Put yourself in that position; right now. What would you do?