What are the risks involved with taking out a Reverse Mortgage? Can you lose your home? What happens if you die before it is paid off? Know the facts.
The biggest fear that seniors have, is that they may lose their house if they are unable to make the payments in the future. With conventional loans the bank would repossess the home if the borrower defaults on the payments. The good thing about a Reverse Mortgage is that this is not a concern. The bank will never take away your home, even if you owe more than the home is worth. You keep ownership of the home for as long as you live in it.
What happens in the event that the home owner dies?
In the event that the owner dies, their heirs will be eligible to pay off the loan and retain ownership of the house. Another option is to use the insurance fees that are paid at closing. These closing costs are slightly higher than regular FHA loans because there is a clause built in that the insurance fees can be used to pay back the loan if the owner dies or needs to sell the home for any reason. This is peace of mind that is built right into the loan. You never have to worry about losing the family home.
How are the payments made?
There are a couple of options for payments issued. One option is to have the whole amount issued in a lump-sum payment. If you are planning to buy something like a car or a boat or similar expense, then this might be a good method. The second option is to have the payments put into a line of credit to be used for emergency expenses. Similar to using a bank line of credit, you use it whenever you need it. The third option is a combination of the two options.
Is a Reverse Mortgage right for you?
If you are planning to move sometime in the near future, then this is not right for you. You would have to repay the loan if you move out or sell the property.
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