Reverese Mortgages in 2022: Here’s How Much You Can Make (You May Be Surprised)

What are the pros and cons of a reverse mortgage?

While borrowing against your home equity can help you save money on living expenses, the mortgage insurance premium and the origination and service fees can quickly add up. The benefits and drawbacks of a reverse mortgage are listed below.

Pros:

• After the borrower dies, non-borrowing spouses who are not included in the mortgage can stay in the house.
• Borrowers facing foreclosure might use a reverse mortgage to pay off their current mortgage and avoid foreclosure.
• The borrower is not required to make monthly mortgage payments against the principal portion of their loan.
• The money raised can be used to cover living and healthcare costs and debt repayment, and other expenses.
• Borrowers may be able to use funds to assist them in enjoying their retirement.

Cons:

• Forces you to take out a loan against your home’s equity, which might be a valuable source of retirement income.
• Fees and other closing charges can add up quickly, reducing the cash available.
• The borrower is responsible for keeping the house in good repair and paying property taxes and home insurance.

Are there any alternatives to reverse mortgages?

If a reverse mortgage isn’t for you, there are other possibilities. For example, if you aren’t yet 62 (or won’t be until shortly), a home equity loan or HELOC is probably better.

Both of these loans borrow money against the property’s value, but lenders limit the amount you can borrow to 80 percent to 85 percent of the value of your property.

Furthermore, you’ll have to make monthly payments with a home equity loan. Payments on a HELOC are due when the line of credit’s draw period expires.

Aside from a home equity loan, you might want to think about:

Cutting expenditures — Cutting non-essential expenses can allow you to stay in your house for the long haul. Consider contacting a local aid agency for help with fuel payments, utility bills, and needed house repairs if you need assistance with a necessary bill.

Refinancing – If you haven’t paid off your mortgage yet, you might want to consider refinancing to lower your payments and free up some cash. First, however, consider the closing costs and new loan terms to see how they may influence your finances in retirement.

Downsizing – If you’re able and ready to relocate, selling your home and purchasing a smaller, less expensive one can provide you access to the equity in your current residence. You can use the selling money to pay cash for a new home or pay off existing debts.

To conclude?

A reverse mortgage might help older homeowners augment their income in retirement or pay for house improvements or other obligations like healthcare.

There are eligibility restrictions that describe who is eligible for this type of loan, the amount of money that can be received, and what the homeowner must do to stay in good standing.

Before committing to a reverse mortgage, it’s best to speak with a HUD-approved counselor. A counselor can help you weigh the benefits and drawbacks of this type of borrowing and how it will affect your heirs after you die.