Things to Consider Before Taking out a Reverse Mortgage

Things to Consider Before Taking out a Reverse Mortgage

Types of reverse mortages

If you are considering applying for a reverse mortgage , you probably have done some research or have a friend who has one. Reverse mortgages are an excellent way for people 62 years and older to convert their home equity to cash that they can use for additional retirement funds, home improvements, or medical expenses. Reverse mortgages permit the homeowner to remain in their home during retirement and retain the title to the property. Instead of making monthly mortgage payments, the mortgage company pays you as an advance on the equity in your home. The money is generally not taxable and does not affect your Medicare or Social Security benefits. A win-win, right? It can be. There are some essential things to consider before getting a reverse mortgage.


Just like a traditional mortgage, reverse mortgages have costs involved. Like mortgages, you can expect to pay origination fees and closing costs at closing. There may also be some servicing fees that are charged to service the loan monthly. Depending on your lender and type of reverse mortgage, you may also have to pay mortgage insurance. Ask your loan officer before closing if you have any questions about the costs of your reverse mortgage.


The homeowner is still responsible for some of the same things that most homeowners must do with a reverse mortgage. Since property or real estate taxes are not included in the loan, the homeowner is responsible for ensuring that property taxes are paid. You must also obtain and pay for homeowner’s insurance and keep the coverage current. The homeowner must keep the property in good condition and make sure that it is maintained properly. Failure to do any of these requirements could result in the lender requiring repayment of the loan.


If your equity is used up by the amount of money you draw from a reverse mortgage, the assets will be reduced for your heirs. Your heirs may purchase the home by paying off the loan if they want to retain ownership. Even if the amount owed is more than the appraised value, your heirs would generally only need to pay the appraised value to purchase the home. Be aware that if you want to bequeath the family home, a reverse mortgage must be repaid by turning it over to the lender, selling it, or buying it.


With some federally insured reverse mortgages, even if your spouse did not sign the loan paperwork, they can usually remain in the home if you die. However, they will no longer receive payments since they are not on loan. The loan will not have to be repaid until the spouse dies, sells the house, or moves out.


Some reverse mortgages offer fixed-rate loans, while others have variable rates. If your loan has variable rates, be aware that they will fluctuate with the market. Fixed-rate loans often require that you take your money all at once in one lump sum. The interest is not tax-deductible either until the loan is paid off.


Some reverse mortgage companies may use high-pressure tactics to promote other financial products. Always look for knowledgeable, experienced reverse mortgage companies that put your interests first and work to find the best options for you. Look for professionals familiar with your local market and offer you alternatives, so your reverse mortgage best fits your needs. Our experts at Northwest Reverse Mortgage not only provide opportunities, but we also spend time with you, answering all questions and concerns.


At Northwest Reverse Mortgage, our goal is to find the best fit for your financial security during retirement. Our loan officers not only help you obtain the reverse mortgage package that is right for you, but we also take the time to educate you and assist you in making the best choices. Check out our satisfied clients’ testimonials, or give us a call for a no-obligation consultation.

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Northwest Reverse Mortgage, LLC. ML- 5797/ CL-1834787/ DFPI# 60DBO-140333. Equal Opportunity Mortgage Broker licensed in Oregon, Washington, Idaho and California. Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act. Credit on approval. Terms subject to change without notice. Not a commitment to lend. Contents not provided by, or approved by FHA, HUD or any other government agency. All potential tax benefits should be verified with a professional licensed tax advisor. NMLS Consumer Access

At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; the loan balance grows over time and interest is charged on the outstanding balance; the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; interest on a reverse mortgage is not tax deductible until the borrower makes partial or full re-payment.