Reverse Mortgage vs. Selling Your Home

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Seniors who are struggling financially have a whole host of options to try to turn around their situation. Among these possibilities include selling your home, downsizing, sharing space, and reverse mortgages, which are possibly the least well-known and most underutilized tool. If you feel backed into a corner and are at risk of losing your home or having to sell, you should look into reverse mortgages as a serious alternative. That being said, reverse mortgages are simply not in the cards for everyone. There are many situations in which reverse mortgages are wrong and will end up making your financial situation considerably worse.

Should I Get a Reverse Mortgage?

If you are reading this article, then chances are you wondering if reverse mortgaging is a legitimate option for you. There are many requirements and conditions that must be me for you to undertake a reverse mortgage, but just because you are technically eligible does not necessarily mean it is advisable. Only upon looking into your specific finances can an accurate decision be made, but some guidelines can be established to help you make a more informed decision.

The primary constraint for entering into a reverse mortgage is age. You must be age 62 years or older, or else you are ineligible to begin with. On top of this, you have to have existing mortgage in your home to draw from. If you meet these conditions, your decision is essentially up to whether or not you can cover the fees and if you are okay with not passing your estate down to your heirs.

As previously mentioned, you have to cover the steep fees associated with reverse mortgages. This includes both initial fees, such as the origination fee, and fees over time, mainly comprised of interest. The startup costs can be very high, so before you can actually get yourself in a better financial situation, you have to spend a little money. If you are unable to do this, then reverse mortgaging is definitely not a good option for you. If you can easily cover the cost right now, then reverse mortgaging is probably your best bet.

Another important point is that upon you dying or moving into a nursing home, your estate will not be passed onto your heirs. They will have the opportunity to pay off the loans and keep the estate, however, but this is the classic tradeoff.

Should I Sell My House?

Sometimes reverse mortgaging is not drastic enough to help out your financial situation. A good example of this is if you still have a large amount in loans to pay off your current house. You may use a reverse mortgage to accomplish this, however reverse mortgages typically pay you around fifty percent of the equity in your home.

You will, without a doubt, receive more money from selling your home and drastically downsizing, but the beauty of a reverse mortgage is that you are allowed to stay in your home. Don’t rush into any decisions and evaluate what is right for you.



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