Is a reverse mortgage a good idea? For homeowners who don’t know the ins and outs of lending, this topic can be quite confusing.
Fortunately, this guide from some of the best mortgage lenders in Tucson, Arizona, can help you navigate your finances and settle any debates regarding a reverse mortgage loan. If you’d like some help, you can also contact experts like Altitude Home Loans to find some clarity on the matter.
What Is a Reverse Mortgage?
A reverse mortgage is a special type of home equity loan exclusively available for homeowners above the age of 62. Borrowers can tap their home equity (usually over 60% of the home’s value) to receive payments so that they can continue living in the house.
The lender you choose will calculate the loan-to-value ratio before making an offer. The figure indicates whether the home’s current market value could potentially cover the loan amount still outstanding on the mortgage. It’s important because you or your heirs will need to pay off the loan, and you’ll have no trouble repaying the lender up to the value of the house.
With a reverse mortgage, you get the equity portion back in monthly payments, a lump sum, or a line of credit from the lender. A financial planning professional can help you navigate which type of payment will suit your needs. However, note the following:
- While you won’t have mortgage payments, you will still need to cover your property taxes, homeowners insurance, and other related expenses.
- The balance of the loan will go up every month since fees and interest rates accrue.
- Typically, you’ll have one year to repay the loan if you move out prior to closing out the reverse mortgage loan.
When Is a Reverse Mortgage a Good Idea?
So, when is a reverse mortgage a good idea if you’re an eligible homeowner? Consider taking out a reverse mortgage for the following:
- Pay expensive medical bills or debts.
- Cover your monthly expenses.
- Make your home more accessible with costly home improvement projects.
- Help your family with finances.
The supplemental payments you receive through this loan can be a significant help. You don’t need to be struggling financially to take out a reverse mortgage loan, either. For instance, you might choose to put the money toward paying for a grandchild’s college expenses.
Are There Drawbacks to a Reverse Mortgage?
While there are certainly times when a reverse mortgage is ideal, there are a few drawbacks. For example, these loans tend to come with higher fees and closing costs. They also cost more to pay off due to accruing interest fees, which are not tax-deductible.
Also, keep in mind that scammers who prey on seniors research this loan, too, so only turn to a trusted lender.
Speak With a Mortgage Specialist From Altitude Home Loans Today!
Is a reverse mortgage a good idea for you? Can you focus only on principal reduction in mortgage payments? Contact Altitude Home Loans at (520) 500-1010 or submit a request online today to connect with a specialist who can set you on the right financial path!