Reverse Mortgages, Are They Right For You?
Reverse mortgages or lifetime loans are an increasingly useful source of revenue for our ageing population. In essence they are a very simple concept. If you own your own home and have paid up all your mortgages but this has left all your money tied up in the home, you can release a percentage of the value of your property with a reverse mortgage.
If you are in the situation where you find that there is no discretionary spending money available or you are faced with a financial emergency such as urgent medical needs or home repairs these sorts of things can run into thousands of dollars. So you really only have the two choices on a limited income. One you can sell the house and release funds. That, however, means leaving your much loved home and may also mean that you are forced to take a less desirable property in an inferior neighborhood. Sure you free up, maybe $100000 but in the process you've had some pretty heavy expenses with real estate fees for selling your home and all the other legal and moving expenses that are an inevitable part of changing houses.
That is one scenario and one that lots of people employ in this situation. Less well known but a very viable alternative is the reverse mortgage. This loan is taken out on the security of your property but unlike a mortgage there are no payments for the duration of your time in the home. Interest accumulates and is payable either on your death, when the house is sold or on you voluntarily selling your home to move on for whatever reason.
Meanwhile you have had the money to spend at those times of financial emergency or even maybe to take that trip of a lifetime. You have not had to move house and you can continue to enjoy your current lifestyle. Not only that but you can continue to benefit from the increasing property value of your home.
You may like to use your reverse mortgage to take out a lump sum and then as property values rise take out further lump sums. You may even prefer to have a regular monthly payments. Many of the companies specializing in those types of financial instruments can be very flexible and if you are over 60 and have no savings then this is something that you should definitely start to explore.
Fees on these loans can range between very little to very high, depending on your provider. If your need is urgent and important to your well being, you may find that you are eligible for government agency help. In any event check out all your options and get advice on fees. Perhaps you are going to move house in a year or two anyway and for a short term loan the fees may make this type of loan uneconomic. It may be that in these circumstances just a regular loan might be better.
Despite some drawbacks reverse mortgages are a very useful source of money for many older people that own there own homes. It is certainly worth exploring and a way of enjoying the fruits of a lifetime of work while you are still able bodied. What is the use of tying up all your money in property until the day you die when you could be enjoying the use of some of that equity now.