Many senior homeowners have started opting for a reverse mortgage to make their retired lives easy and comfortable. Plenty of reverse mortgage lenders have started contacting such prospective borrowers through reverse mortgage leads. However, not everyone might benefit by taking out a reverse mortgage.
Here are a few scenarios where taking out a reverse mortgage may not actually be a wise move:
If your heirs want to inherit your home
A reverse mortgage will help you lead a comfortable life in your own home for your life. But after you pass away your heirs will have to repay your loan from the sale proceeds of your home. They can keep the excess amount if the sale proceeds exceed the amount due. If it doesn’t suffice, they won’t be asked to pay the balance amount. But if they wish to keep the home, they will have to find other means to pay back the reverse mortgage, which might become difficult if they don’t have good credit.
If you are living with someone
Reverse mortgage borrowers generally tend to make their spouses their co-borrowers when they take out a reverse mortgage. Talk to the reverse mortgage lender who comes to via reverse mortgage leads and finds out if the person who lives with you qualifies to become your co-borrower. If not, he or she will have to find another place to live after you move out or pass away. In such a case it might be a better idea to look for an alternate solution.
If you have a deteriorating health condition
Many seniors tend to take out reverse mortgages to pay their medical bills. But if you have a deteriorating health condition, you may at some point in time have to move into a nursing home or an assisted living facility. As per reverse mortgage regulations, such a move would be considered a permanent move if it is for more than 12 consecutive months. At such a time when you may be in dire need of funds, the reverse mortgage will come up for repayment; and if you can’t pay you will have to face foreclosure.
If you have plans to move soon
If you don’t have plans to stay in your home for long, it may not be a good idea to take out a reverse mortgage. The high-up front costs such as the lender fees, the closing costs, and the mortgage insurance make a reverse mortgage a bad deal, especially when it comes to borrowing for a short-term period. Once you move out of your home you will be forced to sell your property to repay the loan within a period of six months. So make sure you understand what you are getting into before you say ‘Yes’ to a reverse mortgage lender who comes to you via reverse mortgage leads.
If you can’t afford the ongoing costs
One of the conditions in reverse mortgage is that you will have to pay your property taxes, home insurance premiums and maintenance bills regularly. If you stop paying these you can lose your home. You will have to make sure you have enough resources to pay your ongoing costs if you want to take out a reverse mortgage.
A reverse mortgage is not such a bad idea if you need money to spend your retired life peacefully. But it’s not the only solution. You can rent your home or downsize to a more affordable one. You could get a home-equity loan or a home-equity line of credit. You can even get your traditional mortgage refinanced. Explore your options and find out which one works for you best before you sign up with a reverse mortgage lender who comes to you via reverse mortgage leads.