If you want to enhance your finances during retirement, reverse mortgages are a good way of having a positive impact on the quality of your life.
There are a number of advantages and disadvantages that you should consider before taking out a reverse mortgage on your property. This guide will help you understand all the elements that you need to think about.
Every product has a good side, the benefits to you, and each will have a few things that you need to consider. The trick is to ensure that it works for you.
The main advantage of using a reverse mortgage lender is that you can access the equity that you have built up in your home, spending it on what you like, whilst still owning and living in your home
So, what are the key benefits of a reverse mortgage?
Improve your finances and stay in your own home: When you borrow against your property you ensure that you can live in your home for as long as your want to, with no monthly mortgage payments to pay back your equity.
Use the money how you like: With most reverse mortgages you get a lump sum of money to spend how you like. There are no restrictions on how you spend the money, so if it’s a new car or that dream holiday you want, it is yours.
Utilise reverse mortgages in a way good for you: The reverse mortgage is a very flexible product and can be tailored for use by different types of borrowers. You could use it to pay back other borrowing, or use it to plan for the future. As it is stated above, it can be used and spent how you see fit.
No claims on your other assets: As there are no monthly payments to pay back, your home or other assets cannot be taken from you. However, it is important to note that you must keep up your payments on other elements related to your home; for example taxes and insurance should these apply to you.
These are just a few of the benefits of taking a reverse mortgage. However, there are a number of other elements that you should consider.
What are the disadvantages of a reverse mortgage?
Consider the fees: The upfront fees can be quite high, so the closing and insurance costs, as well the origination fees should be all considered before you go ahead.
Think about the interest: As there are no monthly payments to be made, the amount borrowed accrues interest (much like any other form of borrowing). The amount you pay back will grow over time; however, it will never exceed the value of your home when the loan is due.
Always appreciate the money: The money that is secured against the property is not always appreciated. You must always consider what the money is to be spent on and understand that, even though you are not paying for it now, there will be a time that you, or someone will have to pay.
If you are choosing a reverse mortgage, it is recommended that you do as much research as possible. It is a big commitment, so it is important that you get it right and do what is best for you and your family.