We hear more and more the term “reverse mortgage” in the financial world as a way to escape hardship. However, are reverse mortgages a good solution in case of financial struggles?
Reverse mortgages are loans available to people over 62 wanting to borrow against the value of their homes. Senior citizens soliciting this service are sometimes in a bind and trying to get cash flow from their house.
Here are 4 reasons why you may rethink signing up for a reverse mortgage.
1. Reverse mortgages compound a higher interest rate
This is a drawback of a reverse mortgage. Unlike a regular mortgage compounding a smaller interest rate, a reverse mortgage adds on higher interest rates which inflate the debt. Elderly people may be struggling to pay their bills on a fixed income, earning just social security benefits, so they may be digging a bigger hole using a reverse mortgage.
2. You may find it hard to afford costs
If you have a cash flow problem in your day-to-day life, you may not want to go the reverse mortgage route. Since you are constantly in need of cash, it means that you could have trouble affording your basic living expenses. After you spend the reverse mortgage’s proceeds, you would be right back where you were, still financially vulnerable.
3. If you are planning on moving soon
Are you planning on moving? It could be for health reasons or to stay close to family. In any case, it may not be wise to get a reverse mortgage because by law, a reverse mortgage is due when you move or sell the house. Most people don’t know this and are shocked to be facing outstanding charges.
4. You desire your heirs to inherit your home
If you have family or anyone you want to leave your house to, a reverse mortgage is definitely not a good option for you. In the event of your death, the sale of your house, or your moving out either you, your spouse or estate have the responsibility to repay the loan even if it means selling the house. Moreover, if the home sells for more than your outstanding loan balance when you pass on, your heirs will receive that money. However, if the home sells for less than the value, your heirs will receive nothing.
Feel free to contact Wendy’s Signature Service to receive a knowledgeable and compassionate service to accompany you through this process.
This is just a synopsis of the cons of getting a reverse mortgage. Please be careful and do your research when you are approached about such propositions. Your older years should not be marred by the consequences of a reverse loan.
Do feel free to contact Wendy’s Signature Service to take advantage of her knowledgeable and professional advice.