Imagine this—you’re in your golden years, surrounded by your children and grandchildren, but your Social Security checks or retirement funds are not as hefty as you would like. This is the situation that millions of older adults face as they age. Retirement ages keep getting pushed further, and further back as less and fewer people can afford to retire. One solution to improving your financial situation and drawing an income is a reverse mortgage.
Many older adults own their home outright or have lived in it long enough that they have a lot of equity. In a reverse mortgage, the lender pays you money each month against the equity of the house. As retirees, it can be a nice supplement to whatever other income you have. You keep the title to your home and possession of your home, and your lender will write you a check every month.
If you are planning on applying for a senior reverse mortgage, there are a few important things to consider. You must be 62 to apply for a reverse mortgage. The cost of a reverse mortgage is much higher than other loans and can even go up to around $30,000 to 40,000 dollars to close. The good news is that you don’t need to come up with that money out of pocket; it is tied into the loan.
If you think a senior reverse mortgage sounds like just what you need for your retirement plan, there are some other important things to consider as well. If you were to move out of your home or sell your home, you would have to pay back the loan. Even if you moved out of the home into a long-term care facility, the loan would still need to be paid back. If you sell your home, you have decreased the equity in your home by borrowing against it. Also, as you borrow against the equity in your home, it ultimately ends up depleting your estate. It is important to consider this if you are planning on leaving your home to an heir after you die.
In an ever-changing financial world, reverse mortgages can be a source of stable income for older adults. It is important to consider both the pros and cons of a reverse mortgage to determine if it is the right course of action for you, your family and your home.