You are 62 years old and you are house poor. You have lots of money as a form of equity in the house you own but you have very little cash. In your younger years, you did not bother to plan for your retirement. Why worry about something so many years away when you can enjoy and live the time of your life now? Money is something to be enjoyed now. Why save money for the time you’re 62 when it is a possibility that you could be dead in the next day or two? Say for example, an adorable but creepy, little girl appeared out of nowhere and killed you.
What matters creative endless toil,
When, at a snatch, oblivion ends the coil?
– Sophie’s World
If only you could reverse time, you would be in a better financial situation than where you are now.
You certainly cannot reverse time but did you know that you can reverse a mortgage? Reverse mortgage might be the solution you are searching for.
What is a Reverse Mortgage?
A reverse mortgage is also called the Home Equity Conversion Mortgage (HECM). It is a loan for old people who have equity in the house that they own. The home is used as collateral to get cash. The lender will be the one paying the borrower that is why it is called a reverse mortgage. There is no need to pay back the loan so long as the borrower is alive and lives in his house which was used for the loan.
Advantages of a Reverse Mortgage
- You can get cash and not worry about paying a monthly mortgage. You incur no additional expenses.
- There is no danger of foreclosure. The homeowner can stay in his house for as long as he lives.
- There is no need for a credit check to qualify for the loan. This is good for borrowers with a not so good credit score.
Disadvantages of a Reverse Mortgage
- The fees and costs associated with a reverse mortgage can be high.
- If your house has a reverse mortgage, it might be difficult for you to sell your house or have it rented.
- If you have a reverse mortage, it might be difficult for you to get future financing. A reverse mortgage can have an adverse impact on your eligibility to get personal or car loans.
Is a Reverse Mortgage Right for You?
If you are seriously considering getting a reverse mortgage be sure to get all the information you need and do your research. Carefully weigh all your options. It might even be wise to consult a professional financial counselor to help you make the most beneficial decision for your situation.