The Truth About Reverse Equity Mortgages

Just what are reverse equity mortgages and how can you determine if you can qualify for it, and whether it is the best option for you. A reverse equity mortgage is a popular option for many seniors but there are also some things that you should know before you sign your name to the dotted line, because it isn’t all jam and cookies. There are a few negatives that you should be aware of before you commit to a reverse mortgage equity and we’ll explore them here so that you make an informed decision about whether or not you want to get one.

Reverse home mortgages are offered to seniors aged 62 years old or older and essentially this type of mortgage is when reverse mortgage lenders offer to buy back your house from you at less the equity that you have in it currently. The catch? You get to live in the house as long as you would like, until you move or pass away. Once you move then you may pay the reverse mortgage back or allow them to take the house. If you pass away, the obviously you will not be around to pay back the loan and therefore the finance company will take the house.

However, there are a few things to keep in mind about the reverse home mortgage. First of all, remember that you aren’t getting free money by any means. The lender is going to give you less than what the equity in your home is worth and it is still a loan. If you move you will have to pay it back or give the house up to the lender. You could be just as well off, if you are planning to move, to sell the home and pocket that money that is leftover after the mortgage is paid off, from the equity that you already have in your home.

Another downside to this type of mortgage is that you will still have quite a few upfront costs to do the loan, and you will have to pay those out of pocket. You will have to pay closing costs again and may even be required to get private mortgage insurance, or pay other fees or penalties. Also, you may find that you cannot get assistance from the government that you were counting on if you get a reverse mortgage, however you are pretty much safe if all you are receiving is social security and medicare benefits.

Obviously the major downside to this is that you will have no home to give to your children when you pass on. Many people spend their entire lives paying off their home and would like to pass it onto their children or grandchildren when they die. With a reverse mortgage, unless you pay off the loan, that option is out. Just a few things to keep in mind as you are thinking about reverse mortgages. Talk to your financial adviser and get all of the options that are available to you before you make a decision on reverse equity mortgages.