Reverse mortgages are becoming one of the most popular options for many people who need money as a supplement for their current income. You right hear so many success stories and good things about this type of mortgage, but don’t leap just yet. Though reverse loans can indeed put money in your pockets when you needed it most, reverse loans are not for everyone and not suitable for every situation. Also, the process of obtaining the loan could be very much confusing and you could end up with unmanageable debts rather than financial bliss.
So what are the things that you need to know before getting a reverse loan? Here are few things to help you out:
Requirements in getting reverse loans
Among the basic things that you should know about this loan is that you must be at least 62 years of age. You must also live in the house where the home equity conversion will be based and you should pay off existing mortgages on that house, if there is any. The value that you can get out of the loan depends on several factors: the value of you house, the mortgage limit imposed by the government for your area or the limit imposed by the lender, both future and current rates, your age and also the fees that shall be deducted upon release of the loan.
The lender will also require you to stay in your home and they cannot seek repayment unless you die or move out. So a disadvantage to this kind of loan is that you are not free to move out and enjoy other places during your retirement.
Mode of getting your money
Most reverse loan lending institutions will give you three options on how you will receive the proceeds of your loan. You can either get the money in a lump sum, as a line of your credit or in monthly payments. But most lenders will allow you to combine these three modes of payout.
The cost of getting reverse loans
Among the most important things to consider is the cost of obtaining a reverse loan. This is because this type of loan can be very expensive. From origination fees and insurance premiums that typically cost about $25,000 or higher – and that’s only for a mortgage of $250,000. To add to that, there are still interest rates to think about.
Effects on eligibility for government assistance
If you are already enjoying any assistance from government, you should first seek more information on whether getting a reverse loan could affect this. Some of the government aids that could be affected are Medicaid, Supplemental Social Security Income and even food stamps.
These are the just few of the important factors that you should consider and think about before starting to seek reverse mortgages. And if you are just seeking the loan just for luxuries and any unimportant investments, you should think this several times over. Reverse loans equate very expensive and high-cost debts to pay off just to spend on things that aren’t even a necessity.