Is a Reverse Mortgage Right for You?

There are some factors you want to consider that will help you decide if obtaining a reverse mortgage is the right decision for you. One of the main things you want to think about is whether you are planning to remain in your home. In order to qualify for a reverse mortgage you must live in the home full time. In the event you obtain a reverse mortgage and then decide you want to move from the home you must repay the reverse mortgage even if you do not sell the home. For example, if you choose to move into an apartment or retirement home and let your children live in the home, you are no longer living there full time and thus no longer qualify for a reverse mortgage. 

Another thing you want to consider is whether a reverse mortgage will allow you to lead the lifestyle you want during your retirement. You must keep in mind that there are limits on the amount of funds that are available and though the lending limit is expected to remain at $625,500 through the end of 2009 the principal limit was reduced by ten percent effective October 1st. You also want to remember that you will only be able to borrow 40-70 percent of your home’s equity.  So if your home is worth less than the maximum allowable loan limitations, it may not benefit you to obtain a reverse mortgage especially if you currently still have a mortgage on your home as you will need to pay that off first with your reverse mortgage before you will have funds for anything else. 

On the other hand if you still have a mortgage on your home and obtain a reverse mortgage you will be free of that payment, a move that will increase your monthly cash flow. Once you pay off your home’s mortgage with a reverse mortgage you will no longer need to make those payments and any additional amount for which you qualify is yours to do with what you wish. If you choose to use it pay off some high interest and/or high payment loans you will also add additional cash into your budget since you will no longer need to make those payments each month.  Since no payments are required as long as you live in the home, using the proceeds from your reverse mortgage to pay off any debts you have can provide you with additional cash in that way as well.

Your age has an effect on how much money you can obtain in a reverse mortgage. The older you are the more money you qualify to obtain. You want to look at that aspect as well when you are attempting to decide if a revere mortgage is in your best interest. There are no restrictions on how you use the funds and though you can not obtain a reverse mortgage on a vacation home, you can certainly use the proceeds to purchase or pay off a vacation home or time share. You just need to remember when you move from your primary residence or die you or your estate must pay off the reverse mortgage.