Strapped for cash? A reverse mortgage could fill your piggy bank back up. 🐖 However, it’s important to know the ins and outs of these puppies before you bring one home. Otherwise, you’ll wind up with a big pile of doo-doo on the floor. 💩
Let’s take a gander at reverse mortgages, who they’re for, and what to know before signing the dotted line. 🏠✍️
Here’s Five Fast Facts on reverse mortgages:
- 🏘️ Casa Cash - Available to Americans aged 62 and older, a reverse mortgage lets homeowners convert their home equity into usable cash. The Federal Housing Administration (FHA) insures most reverse mortgages, giving borrowers certain protections. A big one: you’ll never owe more than your home’s value when it’s sold. There are no monthly payments to worry about and pay out options are flexible.
- 🚨 Risk Factor - Although reverse mortgages are technically “safe”, they may not be right for everyone. If you don’t pay property taxes and insurance bills, you could wind up having to repay the loan or worse…experience foreclosure. The time you spend in your home makes a difference, too. All the more reason to read that fine print.
- ⌛ Long Haul - Who is a reverse mortgage a good fit for? People who plan to stay put in their home for the rest of their lives. If you’re considering a downsize sometime in the future or planning to move to assisted living, pump the brakes. Only using the loan for a short period could leave you with less equity to put into your next living space. You might also pay more in fees and loan costs than what it’s worth.
- 😋 Equity Eater - In a traditional mortgage, your balance goes down as you make monthly payments. On the flip side, a reverse mortgage balance grows with time in the form of fees and interest. Even though you won’t owe anything until you leave, the balance eats away at the equity in your home. If you’re planning on making your home a big part of your inheritance to your loved ones, you might want to think twice.
- 💵 Cost Boss - With a reverse mortgage, homeowners are still responsible for paying for home insurance, any HOA fees, maintenance costs, and property taxes. If any of these get missed, your loan could go into default. If you’re on a fixed income, make sure you factor these costs into your game plan before pulling the trigger.
🔥Bottom line: From unexpected medical bills to relief on grocery bills, a reverse mortgage could be the answer you’ve been searching for. Just make sure to think long and hard about things before jumping into one. Retirement life looks a lot different in 2025. Many older folks are working long after they thought they’d hang up their hats. What does working in your 80s even look like? If you’re curious, read this article!
Would you take out a reverse mortgage?
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