Like many Americans in retirement, you may wonder about the best financial course to take and how to use the money and assets you have worked to build over time. You probably have built up your equity over the years and may even own your home free and clear.
For many baby boomers, the home is your largest asset, and you may wonder if a reverse mortgage is right for you. If you are considering a reverse mortgage, here are some things to consider when deciding whether a reverse mortgage is right for you.
Ask yourself these three important questions to determine if a reverse mortgage is right for you.
1. Do you wish to stay in your home?
This is the most important question to ask yourself if you are considering getting a reverse mortgage versus putting your house on the market. If you don’t plan to stay in your home, or if you don’t plan to be there for the long term – a reverse mortgage may not be the right option.
If, like most Americans, you wish to remain in your home while you age, this type of loan, designed expressly for aging in place, is an option to consider.
2. How much is your home worth?
To qualify for a reverse mortgage, you must be at least 62 and have substantial home equity. To get a reverse mortgage, all existing loans on the home must be paid off. Borrowers can use loan proceeds to pay off the existing mortgage and then receive any remaining proceeds through a lump sum, term or tenure payments, or as a line of credit.
Selling may be an option for you, but the recent housing crash has left many homeowners with less home value than they had five years ago. Getting a reverse mortgage with the potential to increase cash flow could be a viable alternative to selling at a loss.
3. How equipped is your home for your needs?
A borrower can use reverse mortgage proceeds however they choose. Some borrowers use their proceeds to make home improvements or modifications so that the home is better suited for aging in place.
Some changes to consider may be:
- Wheelchair-accessible ramps or chair lifts
- Wider door frames
- Adding additional lighting
- Living quarters on the main floor
- Door pulls and handrails for easier access
Changing your home to meet your living standards through a reverse mortgage could allow you to remain in your home rather than move into a new residence.
Deciding where to live in retirement and whether you will move away from the home where your family has lived for years is a major decision, as is taking out a loan to help you meet your financial needs in retirement.
How do I know if the reverse mortgage will work for me?
Are there any alternatives to a reverse mortgage?
What if I do not want to stay living in my current home?
Can you lose your house with a reverse mortgage?
How long can I stay in my house if I get a reverse mortgage?
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