Reverse Mortgage Caveats

Anyone who tells you that your finances are simpler after you retire is only telling you part of the story. It is true that you no longer have to spend money on commuting to work or dry cleaning your work clothes, and if you were lucky enough to qualify for a mortgage in your younger days and keep making payments until it was paid off, then living in a paid off house is certainly nice. Of course, there is also the pesky fact that you no longer have employment income; living on a fixed income that will never increase is anything but glamorous or stress-free. To make matters worse, your opportunities to borrow money are limited when you retire. Most lenders, from reputable international banks to payday lenders that operate out of liquor stores, are willing to lend to you because you have a job, and there will be money coming in that you can use to repay the loan. Your best options are to borrow against assets you own. Some seniors own nothing more valuable than a car, so Social Security beneficiaries make up a substantial portion of the auto title loan clientele. Reverse mortgages are popular among retired homeowners, but they come with their own set of risks. If you are considering borrowing a reverse mortgage, contact a Philadelphia debt relief lawyer.

Don’t Get a Reverse Mortgage Unless You Need One

The reverse mortgage is the senior breakfast of loans. It is only available to borrowers aged 62 and older, that is, old enough to draw Social Security retirement benefits. Another prerequisite is owning a house with a paid off mortgage. Therefore, the interest rates on reverse mortgages are lower than anything the rest of us working people can get. Best of all, you do not have to repay a reverse mortgage as long as you are alive and residing in the house. Most of the time, when the borrower dies, the personal representative of the estate repays the reverse mortgage from the borrower’s estate.

The fact that your estate must repay the reverse mortgage should be reason enough to make you think twice about borrowing one. If you have another source of cash, you should rely on that instead, whether it is renting out a room in your house or un-retiring and returning to the workforce.

It Is Easier to Stay Out of Trouble With a Home Equity Line of Credit Than With a Reverse Mortgage

The scariest reverse mortgages are the ones that pay you a lump sum, and then your estate repays it in a lump sum after you die. Slightly less scary are the ones that pay you in installments, because you can only rack up debt for as long as you are alive, but this can still add up to a lot for your estate to repay. The least risky reverse mortgages are the ones that function like home equity lines of credit, where you borrow only as much as you need and repay in installments.

Contact CONSUMERLAWPA.com About Reverse Mortgages

A Philadelphia consumer law attorney can help decide whether to borrow a reverse mortgage.  Contact CONSUMERLAWPA.com to set up a free, confidential consultation.

Source:

cbsnews.com/news/reverse-mortgage-dos-and-donts-seniors-should-know-now/?intcid=CNR-01-0623