Reverse mortgages are not for everyone. They are also not a loan of last resort.
What they are is a way for retirees or seniors to use the cash they have invested into their property to live comfortably during retirement.
Terry Savage, an investment advisor columnist for the Chicago Tribune, suggests that reverse mortgages may be perfect for some borrowers while imperfect for others, depending on their needs and current financial situation.
One of these perfect candidates was her own father, who obtained a reverse mortgage 15 years ago in his FHA-approved condominium. One of her father’s worries was the accruing interest on the amount borrowed, which grew steadily throughout the years as he pulled out more funds from his reverse mortgage line of credit to supplement his in-home care.
Savage also lists the various factors to consider when obtaining a reverse mortgage. Most importantly, a borrower must stay in the primary residence at least 5 years after the closing of the reverse mortgage for the loan, and the closing costs, to be worth it. For example, a borrower looking to sell their current home and buy a new property would be better suited for a reverse purchase than a regular reverse mortgage.
Most importantly, a borrower should take into consideration that property taxes, insurance, as well as any maintenance in the home are still they’re responsibility.
However, Savage reminds readers that reverse mortgages are also a non-recourse loan, meaning heirs are not responsible for repayment, and carry a mortgage insurance premium, which ensures that the borrower does not owe more than the home is currently worth.
One of the benefits for Savage was the fact that her father could live comfortably and decently in the home he knew, with all the comforts necessary, during retirement. After he passed, she was able to turn the home over to the lender and use it to repay the loan on the property.
Most importantly, Savage and her family discussed everything with her father and proceeded according to their mutual understanding of the benefits of the reverse mortgage as well as the potential pitfalls. Borrowers are also required to go through reverse mortgage counseling, by a third-party company, to ensure they understand all the information presented to them is correct and they understand their financial obligations.
Determining if a reverse mortgage is right for your retirement goals or a loved one’s goals is as easy or as hard as you would like it to be, please let PS Financial Services walk you through the process and make easier for you and your family. Give us a call at (888) 845-6630 to speak to one of our brokers or email us at info@PSReverseMortgage.com. A reverse mortgage calculator is great to get started but it’s the personal touch that matters.