It’s not rare that you’ll find some people who believe a reverse mortgage is a rip-off, however for many individuals it can be a very lucrative loan. Having reliable monthly income is not a rip-off if that’s what you need to maintain financial independence, so there’s really no need to view reverse mortgages that way.
It’s a common misconception that banks own your house after you’ve chosen a reverse mortgage, but this is simply not true. Another party can only own your home after the duration of a reverse mortgage if you don’t pay back the loan. The next of kin will still own the home after a death. Typically, next of kin will choose to sell the house to repay the reverse mortgage rather than pay back the entire balance unaided.
As long as you’re aware of the stipulations and rules that come with using a reverse mortgage, then it’s simply another financial tool which you can use for your portfolio, and not a rip-off.
Having a predictable steady income at age 70 is a huge perk that many people have not really even thought about until they hear about reverse mortgages. So before you go on believing that reverse mortgages are just a blatant rip-off remember that there’s a lot of good things about a reverse mortgage.
Other Types of Loan Options
There are not a whole lot of loan options that will pay you to live in your own home. Whether or not you decide on going through with a reverse mortgage, you owe it to yourself to contact a loan advisor to see the benefits for yourself if you were to actually reverse your mortgage.
If you’re in California and your home is worth enough money, then you can even qualify for a jumbo reverse mortgage. Whether you qualify for a jumbo reverse mortgage or not, remember that reverse mortgages are the only loan options that really allows you to stay in your home, while collecting payments, with no repayment due until you choose another home as your primary residence.
Benefits of a Reverse Mortgage
Besides the consistent monthly income, there’s also the fact that you’ll never owe more than what your home is worth. And reverse mortgages are backed by the federal government so they track all of these types of loans to ensure that all the proper rules are being followed by lenders. This helps to stop any situations where older homeowners are being taken advantage of, rather than helped.
There is the option to take a lump sum with most reverse mortgages, however it’s important to note that route will lead to a lot less overall money for you. It’s your house, so really you want to maximize the cash producing value of the home, don’t go for the lump sum payment if you can avoid it.
It’s true that financial responsibility means something different to everybody. To us, financial responsibility is synonymous with financial freedom and it’s about being able to take care of yourself even as you’re getting older.
If you still want to live in your own home as you age, then a reverse mortgage can be an excellent option. It’s not a bad idea to include your family in on this decision too, that way you can get their thoughts on how they feel about the home.
It’s possible your family would rather you just sold your home now and lived off that lump sum of money. In that case selling your home, and downsizing your living situation might be the better option for your life.