A reverse mortgage is designed for the elderly lifestyle. If you’re at least 62 years old, you can use it to turn your property into an ATM, converting its accumulated equity into cold cash. If you’re already retired, you can receive the proceeds in installment to boost your limited income.
However, this kind of home loan can be risky. Reputable reverse mortgage brokers like Primary Residential Mortgage, Inc. would caution you that taking it out might leave your heirs with debt instead of an asset if you suddenly pass. You ought to examine your financial situation and think with the foresight to avoid or at least minimize its potential dangers.
Consider applying for a reverse mortgage only when:
You Have an Ironclad Plan to Pay It Off
The costs of a reverse mortgage are only payable when it matures, or you fail to meet its requirements before the term is over. Before you apply, make sure you have effective ways in place to pay the loan off even when it suddenly becomes due.
You Don’t Qualify for Other Loans to Tap into Home Equity
A reverse mortgage isn’t the only loan that allows you to turn your home equity into dollars. In most cases, other options, like a cash-out refinance, have milder risks. Think about it ONLY when you’re unable to qualify for other mortgages.
You Have No Plans Leaving Your Home for One Year
One of the universal requirements for reverse mortgages is keeping the property in question as your primary residence. Your lender might think otherwise if you fail to live in it for 12 consecutive months. If you plan to somewhere else for an extended period or move out for good, don’t take out a reverse mortgage.
You Can Pay for Essential Home Improvements
Another non-negotiable responsibility of reverse mortgage borrowers is property maintenance. If your lender discovers that house has deteriorated with neglect, you might be forced to pay all of its costs in full immediately.
Reverse mortgages are only good for prudent borrowers. If you must obtain one, it’s imperative that you prepare for possibilities and understand your responsibilities to keep it from working against you.