1) Do you really need a reverse mortgage? Start by assessing honestly why it is that you are interested in a reverse mortgage. If you want some cash to take that dream vacation, a reverse mortgage is an expensive way to pay for it. Taking out a pricey loan to make investments or to purchase insurance products is also not a very good idea. Make sure the neeeds you really want to address are really worth the costs. If anyone is trying to sell you something and recommending you use a reverse mortage to pay for it, run the other way. That's generally a good sign that you don't need it and shouldn't be buying it.
2) Do you have less costly options? Do you have other financial resources that you could use before taking out a loan? If you could easily make the monthly repayments on a home equity loan or home equity line-of-credit, these alternatives are less costly than a reverse mortgage. Many state and local governments offer low cost reverse mortgages that can be used to pay your property taxes or make home repairs. Have you looked into the costs and benefits of selling your home and moving to a less expensive one?
3) Can you afford a reverse mortgage? These loans are expensive, and the amount you owe grows larger at an ever increasing rate. The younger you are when you take out a reverse mortgage, the longer the compound interest will grow, and the more you'll owe. On the other hand, due to high up-front costs, these loans can be especially costly if you sell and move just a few years after taking one out.
4) Can you afford to start using up your home equity now? The more you use now, the less you will have later when you really need it more, for example, to pay for future emergencies, health care needs, or everyday living expenses, if your current needs grow or your income does not keep up with inflation. Or you may need your equity to finance major home repairs or a move to assisted living. If you are not facing a financial emergency, then consider postponing a reverse mortgage. Homeowners who wait have a "reasonable expectation of securing a better product at a lower cost in the not-too-distant-future," according to a report by the Fidelity Research Institute.
5) Do you fully understand how these loans work? Reverse mortgages are quite different from any other loans, and the risks to borrowers are unique. Before considering one, you need to do your homework carefully and thoroughly. You can find many of the answers to your questions by logging onto AARP.com
Source: AARP.com Republished by Glenn Clawson and GCC Property Solutions
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