A reverse mortgage is a loan offered to elderly homeowners who are in need of extra cash. This allows an older homeowner to take out a new loan based off the amount of equity they have acquired in their home. Why are you interested in this type of loan and is it truly necessary you obtain one? Are the elevated costs of this loan worth it? What would you do with the funds if approved for this loan? If you are looking to obtain a reverse mortgage to pay for the vacation of your dreams, this loan is probably not the best idea and will be a very costly way to pay for it. If someone is trying to sell you something and suggests that you take out a reverse mortgage to cover the costs, be very wary to do so. Remember that this is not free money.
Can you afford to take on a reverse mortgage? Generally, these mortgages are pretty expensive and the amount owed only grows as time goes on. The younger a person is when they take on this loan, the more they will owe as time goes on and interest starts compiling up. Do you really want to use up your equity now? Once you secure a reverse mortgage you will typically use up a significant amount of the equity you have obtained. Emergencies come up all the time, especially with elderly homeowners. These may include such factors as medical bills, health care, and everyday living expenses. If you do not need the extra funds now it would be wise to wait until you absolutely need this assistance. Are there any less costly options other than a reverse mortgage?
Are there any other financial resources you may have to secure extra funds besides taking out a new loan? For those of you that do not have any other way to safe funds and have the means to make monthly payments on a new loan you may want to consider a home equity loan or home equity line of credit (HELOC). Always do extreme research to ensure you are getting the best deal available for your situation. This loan is generally very easy to attain because there is no income or credit requirements involved. Reverse mortgage can benefit older folks who are in desperate need of extra funds, but always make sure you have the means to afford this new debt.