Many times when people hear about reverse mortgages they often think of a scam, rip off and offer the advice to not do it. I think in many cases people are unaware of the advantages for seniors especially when they are on a fixed income or would like to enjoy their golden years and can't afford to do so. Many are house rich and cash poor.
Today someone asked me about reverse mortgages and it was the same reaction on their end that I have heard often but I think most people are not aware of how reverse mortgages work. They are fantastic for the senior citizen trying to make it on their retirement and social security and find that at times living on fixed income is really challenging.
Often times, its someone younger who does not understand that the reverse mortgage is meant to make people's life over the age of 62 much more manageable financially and the younger folks may concern themselves with inheritance vs. what might be best for mom, dad, grandma or grandpa.
Would You Want Your Mother To Take A Reverse Mortgage?
Recently my father passed away. Less income, same bills and my mother's benefits changed. If my mother were to ask this question I would encourage her to do so if need be. Not likely though. She is a financial wiz so I don't think it would even be an issue or a decision to make. As a family we want her to live comfortably and enjoy the rest of her life in the manner in which she deserves! We don't care about inheritance...we care for our mother.and the ability to not have the pressure or stress of worrying about her money like so many seniors do.
Things You Should Know About Reverse Mortgages
- Eligibility requirements are seniors must be at least 62 years of age
- Own the home or have a very small mortgage
- There must be equity in the home
- The bank will make payments to the homeowner based on a percentage of home equity
- If the homeowner dies than the home must either be sold or the loan repaid unless there is someone else on title that is 62 years old or older
- A homeowner must make sure and pay their taxes and insurance
- A home that is approved by FHA will usually get approved
- A home owner will have access to a minimum of 60% of the loan limit amount for the 1st 12 months.
- You can receive the proceeds from the reverse mortgage either by lump sum, line of credit, monthly payment or monthly payment for a specific time frame.
- Proceeds are tax free
- Interest rates may be lower than other options
- Fees to obtain the loan may be higher due to FHA Mortgage Insurance Premium, loan origination fees.
Tips and Advice Before Obtaining A Reverse Mortgage
- Work with someone who understands reverse mortgages
- Ask about government programs that might affect your qualification due to having a reverse mortgage.
- According to some websites social security and medicare eligibility is not affected. Check with a professional before making that assumption. Loan programs change often as well as government programs.
A reverse mortgage may not be the best option for you. Please whatever you do, make sure and talk to someone who is well versed and understands the pro's and con's of this type of home loan. So I ask, if your mother wanted to take out a reverse mortgage what would you say to her?
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