Is a Reverse Mortgage Right for You?

Reverse Mortgages: Is it right for you?

The decision to do the Home Equity Conversion Mortgage (HECM) program, also known as a Reverse Mortgage can be a difficult one to make. You’ve done your research, seen all the commercials but you’re not sure whether or not a reverse mortgage is right for you. If you do your research, a reverse mortgage can be the best decision that you have made in your golden years as part of your retirement plan. In fact, ­­­­according to an AARP survey, ­­­93% of seniors are satisfied with their FHA-insured reverse mortgage loan.  A reverse mortgage is a great idea for seniors looking to stay  financially independent and to  live in their home indefinitely.  They are not required to pay back the loan in their lifetime, unless they have permanently moved out, or stopped paying their insurance or taxes. If those have not occurred, then the loan would officially become due when the last borrower passes away.

How do you know that a reverse mortgage is a right option for you? Many seniors are unsure whether or not they should take the plunge on the reverse mortgage, but if you ask yourself the following questions, it can help make the decision easier to make.

1. Do you or your children/heirs care whether or not they keep the home?

• Many people want to keep the home in the family. Why not? There are plenty of memories made in your home, from raising your own children to visits from the grandchildren. If you get a reverse mortgage, it is not guaranteed that after your passing that your heirs will get to keep the property, but you should begin the discussion with your children with what they plan on doing with the home after you pass away. While it is still possible for heirs to keep the home after the borrower passes away, they must be aware of the financial situation and decisions that they may encounter. This conversation is important whether or not your children want to keep the home, because once the last borrower passes away, the loan becomes due. Once the loan is due your children have the option to refinance the loan to help pay it off, or they can sell the home and use the funds to pay back the reverse mortgage. Because this is a non-recourse loan, the banks will not look at other assets to repay the loan, as long as the home is returned for them. That is beneficial for families who choose not to do anything with the home. Tip: Include your children/heirs (especially if they are living at home) in the FHA-mandated reverse mortgage counseling meetings, so they can be informed of what to do after your passing.

2. How long do you plan to stay in the home?

• While there is a growing trend with multi-generational living, with elderly parents moving in with their adult children or vice versa, there are still many senior citizens who still want to remain independent and continue living in their home. If you plan on moving in with your children in the short-term, it might not be a wise decision to do a reverse mortgage because of the costly fees.  On the other hand, if you are looking to keep your independence and want to stay at home, you can look into your reverse mortgage options.

3. What is your financial situation?

• More and more people are finding that they have not saved enough to help support themselves during their retirement years. A reverse mortgage can help you remain independent without worrying about paying back your children, friends, or other loans in your lifetime. If you live on a fixed-income, or unexpectedly found yourself in a financial situation that you did not expect to be in – a reverse mortgage might be the option for you. With reverse mortgages, there are no limitations on how you can spend your money, including using it to pay for day-to-day living expenses, or to make big purchases, so you are able to spend it as you please to  ensure that your golden years stay golden.  A reverse mortgage can be beneficial for those who want to remain financially independent while living at home.

4. Do you have enough equity in the home?

• This question is more of a qualifying concern of many individuals. If you do not have enough equity in the home, then maybe it might not be a good idea for you to get a reverse mortgage. Most lenders require at least 40% equity, however, this is still dependent on the age of the borrower.
• Use this handy Reverse Mortgage Calculator to determine your eligibility.

 Do you feel like a reverse mortgage is right for you? To learn more about Reverse Mortgages, speak with an advisor today: 1-888-808-8486.

 Read Related Articles:

5 Reverse Mortgage Benefits

Should I Get a Reverse Mortgage?

Are Reverse Mortgages a Good Idea for Your Parents? 

About the Author:

I have been working in the reverse mortgage industry for 20-plus years. My goal is to provide consumers the most up-to-date and relevant information about the reverse mortgage industry and how it can affect them.

Thanks  for reading!

-Alan F.

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