Over the past few years, cost of living prices have increased to levels never before seen. As a result, retirement and fixed income living has become more difficult. Reverse mortgages were created to allow individuals over the age of 62 to utilize the equity in their homes to live off of; without penalty of having to pay back the principle.
The way that a reverse mortgage works is that you access the equity and the money is not paid back until the homeowner dies or moves and the home is sold. A reverse mortgage has its advantages.
- Reverse mortgage allows you the flexibility in using the equity in your home by taking out cash in the form of:
- Monthly withdrawals.
- A large lump sum.
- Accessing the equity like a line of credit, using it when needed.
- The money you borrow does not need to be paid back and is typically interest-free.
However, reverse mortgages do carry drawbacks as well.
- Typically reverse mortgages are only available for individuals over the age of 62 who are owner occupants of the home they wish to take the reverse mortgage on.
- You can eat into the equity in the home. The ratio of debt to home value is actually increasing, whereas with a traditional mortgage, the ratio will decrease over the life of the loan.
Here are some easy ways to find out more about reverse mortgages, including who you can sign you up and whether applying for one is right for you.
- Search the internet. Utilizing a search engine, such as Google or Yahoo and searching for keywords "Reverse Mortgage Information" yields a number of websites that will educate you on the pros and cons of a reverse mortgage.
Contact your local bank or mortgage company. Call or visit a local branch and discuss what options that they may have for your mortgage. The banker should be able to discuss the benefits and drawbacks of all loan types, including reverse mortgages if they are offered by that financial institution.
Visit websites or call organizations that are designed to assist the retired community, such as AARP (American Association of Retired People). Since the Reverse Mortgage usually requires that the homeowner be over the age of 62, AARP is a great resource for information on a reverse mortgage.
Another quality website is the National Reverse Mortgage Lender Association website, which was designed to give information on reverse mortgages to seniors who may be interested in the program. The site includes calculators and Frequently Asked Question links.
With any major financial decision, it is important that you review all the facts prior to making a final decision on how to manage your money. If you have any questions, be sure to get the answers prior to signing the final papers. A reverse mortgage could be a great way to live your golden years with less worries.