For Americans aged 62 and older, the reverse mortgage is a viable option that can put some cash into their hands quickly, tapped from the available equity in their primary residence. But it's always wise to seek out reverse mortgage advice before signing on the dotted line.
The best reverse mortgage advice doesn't typically come from the banks that are trying to sell you on their reverse mortgage package. Rather, it comes from third-party sources that don't earn an interest rate and profit off a packaged loan. If you're of the qualifying age and own your home and occupy it as your primary residence, a reverse mortgage is a decent option to consider if you require access to capital to preserve your lifestyle. Before you dive in head-first, though, make sure you consider the following reverse mortgage advice.
Know your options
Consider a reverse mortgage as the very last option. Experts at the Journal Of Accountancy say taking on debt later in life should be a last resort that is only pursued when all other options have been exhausted. There are other viable options that won't saddle you with debt, such as selling your home, downsizing, or even renting the home out.
Know the risks
Be aware that there are risks involved when taking on any type of debt, including a reverse mortgage. For example, if you sell your home, the loan is due immediately, including any associated compounded interest. There are also origination fees, interest fees, and more that you should be aware of. Make sure you're informed about all of the risks and potential downsides so you can make an educated decision about your financial future.
It's a big decision
Understand that getting a reverse mortgage is a big decision. It's taking a loan out against a loan that you just spent a large portion of your life working to pay off. Taking the lump-sum benefit may affect your eligibility for programs like Medicaid as well as certain state benefits, which can vary from state to state. The reverse mortgage will also deprive your heirs of a home that you could otherwise leave them, too.
Seek independent reverse mortgage advice
By federal law, you must meet with HUD-approved counselors before you can take out a reverse mortgage. Avoid counselors who are recommended by the bank. Instead, research independent counselors who don't work for, or with, any banks. That way you can be sure that you're getting an unbiased opinion that's not in favor of any bank that's trying to earn your business.
You can learn more and get more reverse mortgage advice by visiting the U.S. Department of Housing and Urban Development website.
This article originally appeared on Now It Counts.