Are reverse mortgages good for seniors?

Income from reverse mortgages generally does not affect Social Security or Medicare eligibility for seniors and can be used according to the wishes of the elderly. These benefits can ease the financial burden on a family and allow an elderly person's estate to pay for long-term care or living expenses when other means are not available. This general rule isn't unique to reverse mortgages; it usually doesn't make sense to get a new term mortgage (such as a refinance loan) on a home you're about to sell either. If you and your spouse are 62 or older and are named landlords on your home title, getting a reverse mortgage together might be a good option.

If you have equity in your home but aren't comfortable with a reverse mortgage, mortgage refinancing is a great way to borrow against that equity. Compared to other types of loans, these costs make reverse mortgages a relatively expensive way to borrow money. Keeping up with your property taxes, homeowners insurance, and home maintenance is essential if you have a reverse mortgage. Meanwhile, another report, this one from the Consumer Financial Protection Bureau (CFPB), offers another reason, namely, that seniors understand that a reverse mortgage is simply not viable for any homeowner who plans, at some point, to sell their home.

Spouses who are not old enough to qualify as co-borrowers may be listed as non-borrowing spouses on the reverse mortgage. Using a reverse mortgage to pay a family member to care for an elderly loved one may seem like a strange idea. During the reverse mortgage financial evaluation that is part of the HECM application process, potential lenders will determine if you have the ability to meet these obligations. If you may have to move because of health or disability, a reverse mortgage is probably not wise because, in the short term, your initial costs are unlikely to pay off.

While there are ways for heirs to pay a reverse mortgage and keep the house, the loan does complicate things. Similarly, if you want to protect a spouse under the age of 62, other family members, or anyone else who lives with you from losing your home when you die, then a reverse mortgage isn't your best option. Reverse mortgages may also come with variable interest rates, so their overall costs could increase in the future. Reverse mortgages allow homeowners 62 and older to access their home equity in cash, without having to move.

While a reverse mortgage may seem like a good way to access cash in your golden years, it's important to understand the reality of this type of loan. Seniors with good credit and enough income to make monthly payments should look for cheaper alternatives, such as a home equity loan or a second mortgage, before even considering reverse mortgages.

Mayra Holdiness
Mayra Holdiness

Infuriatingly humble pizza specialist. Wannabe pop culture nerd. Amateur internet scholar. Friendly bacon lover. Evil twitter fan. Freelance web fan.

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