The greater part of this country’s senior population has a great deal of their wealth and security locked up in the equity of their homes. The current economic stalemate has played a role in affecting the financial stability of every sector of the consumer demographic, including these aging constituents as well. If they, along with everyone else, are struggling to meet their monthly expenses, or simply keep up with medical costs, tapping into that equity with a reverse mortgage may often be the only solution. However, while the reverse mortgage does have important benefits that allows borrowers access to much needed cash, the program does have some disadvantages to consider over the long term. And, while there are no basic restrictions on how a consumer may use their reverse mortgage earnings, they may not be for everyone. Be sure to learn how a reverse mortgage works to see if this might be an option for you.
Consider This Before Pursuing a Reverse Mortgage
Low-Income Assistance – If a potential borrower is presently, or soon to be entitled to low-income assistance through federal or state government programs like Medicaid, there is a possibility that the proceeds from a reverse mortgage may disqualify the borrower from eligibility. Currently, Social Security and Medicare are not subject to this restriction.
Plans for Relocation – A principal stipulation of a reverse mortgage is the mandatory requirement that the borrower maintain the loan-collateralized home as the primary residence. The loan balance becomes fully payable if the borrower decides to relocate. In addition, the initial closing costs and insurance premiums of a reverse mortgage are much higher than a standard mortgage, which negate any benefits if the borrower relocates too soon within the term of the loan.
Long-Term Obligations – A reverse mortgage comprises a loan of the funds borrowed, along with the fees, closing costs, and interest. This loan balance grows for as long as the borrower continues to reside in the home, which means if the borrower sells or relocates, the loan balance will be more than was borrowed originally. In addition, all taxes and insurance must be maintained, along with all upkeep and improvements to the residence for the entire term of the loan program.
If after reading this article you still think a reverse mortgage might be your best option, you need to start preparing for the process of obtaining a reverse mortgage. First, we suggest reading up on what you should know about reverse mortgage interest rates. Then, take a look at our list of the top lenders for reverse mortgages. With this information, you will be well-prepared and ready to get started with the lender of your choice.