Recent studies show that seniors retire with more debt than they can afford and less earnings. If you find yourself in this bracket, then seeking a reverse mortgage can present you with a better option. In as much as they are available to retirees or those planning for the same, you should ensure that you analyze your situation well. This means that you should ask yourself some fundamental questions.
Do you have substantial home equity?
If you do not own your home or cannot be able to pay off your mortgage with the proceeds you will receive with the reverse mortgage, then it probably isn’t suitable for you. Your equity will depend on your home value, reverse mortgage interest rates and your age. Thus, you will need to contact several reverse mortgage lenders who will be able to provide you with a quote.
Are there other cheaper options?
The biggest advantage that you will receive in this form of mortgage is that you will not be required to make monthly payments. Thus, even with your low income and a poor credit score, you will be able to get approved for this loan. As good as this, you will have to contend with a higher interest rate. Thus, you should consider other forms of getting finances such as:
• Taking a part-time job
• Renting a section of your house
• Selling and moving to a cheaper home
• Seeking government’s assistance
• Traditional home equity loan
Should you use your home equity?
Since reverse mortgages can get you out of a tight spot, you should try and hold off until the right moment presents itself lets you use it only to regret that there was no need for it. For instance, when you are paying off your medical bill, you could consult your bankruptcy lawyer to give you advice on how you can use your debt situation to discharge it. This will enable you to preserve your home equity for a more dire time.
How long will you be staying in your home?
Since your lender will be sending you letters to sign and return to confirm you are still living there, you should determine whether you will be at your home for the entire mortgage period.
If you happen to fall sick and have to be moved to another home where you can specialized care, you will have to contend with the loan became due and payable immediately. Therefore, you should assess your situation very carefully.
Have you discussed this reverse mortgage with your spouse?
You should ensure that your spouse is aware of all the requirements and stringent rules that relate to the mortgage. This means that they will need to be in the house, lest it be sold once they move to recover the money if they are unable to.
Have you discussed it with your family?
Since your child or whoever you live with might see it as a risk since their home might be lost in case something happens, you should discuss these matters with your family members and hear their opinion.
All in all, you should evaluate all these questions relating to reverse mortgages before you take it out since it can have grave consequences should you fail to make payment when it falls due.