Consider a Reverse Mortgage
A reverse mortgage offers a unique approach to owning real estate, as well as providing an untapped source of retirement income security for retirees. The biggest selling point is that the home owner can receive cash from the equity in their home without having to assume more debt while continuing to live in the home. Of course, any selling point requires a trade off and that is the owner(s) death or the sell of the property requires that the reverse mortgage balance PLUS interest must be repaid to the mortgage lender. The loan is repaid by the heirs who can choose to sell the home to cover the remaining balance, or can refinance the balance to retain ownership.
The benefits of a reverse mortgage are:
* You can receive a large lump sum payment.
* You may receive a structured payout over time, similar to Social Security Benefits, a pension fund, or a retirement account.
* You can choose any combination of the lump sum and structured payout systems you require.
* You do not have to repay any portion of the loan as long as you occupy the home.
* You require no income to qualify for the plan, but must be older than 62 years of age and own your home.
As you see, if you encounter unexpected expenses (i.e. medical bills) or have not saved enough for retirement income security, a reverse mortgage could be of significant interest to you. It will provide you with a source of income that you are not required to repay throughout the course of you life unless you sell your home.
However, there is no such thing as a free lunch. Therefore, the mortgage lender is going to be repaid plus interest for allowing you to borrow their capital. The following are a list of negative aspects of the reverse mortgage process and should be seriously considered before signing on the bottom line.
* A reverse mortgage is a loan that increases debt.
* The loan is repaid by selling the property or by refinancing the property.
* When the loan becomes due, you or your heirs will be faced with repaying the entire mortgage.
* If the value of the home does not keep pace with the interest rate, the amount of debt could be greater than the home’s value.
There are a number of factors to consider before making a decision to get a reverse mortgage. The concept of leaving your heirs with your assumed debt is a frowned upon concept at best, so if you live in an area where real estate values fluctuate rapidly or appreciate slowly, a reverse mortgage is probably not for you. If you have a much loved home that your heirs would prefer to keep and you own your home (i.e. no mortgage) then its best to leave their future inheritance alone, unless of course you have an immediate need for income. To decrease your risk, you could accept a reverse mortgage for half of the value instead of the full value as a safety net to prevent any potential financial losses for your heirs.
Overall, there are many situations that could require a need for retirement income security for retirees. If this happens, review the options with your heirs or a trusted financial advisor. Any decision such as this requires serious consideration and must be a well thought out venture.