If you are a cash-strapped senior citizen living in Southern California with equity in your home but not enough money to pay your bills, you are likely considering a reverse mortgage. Many people are unclear about the reverse mortgage pros and cons. A reverse mortgage doesn't sell your home to a lender. Your Social Security isn't affected. You can't outlive your reverse mortgage and your heirs can still inherit the home.
People who are 62 years of age or older meet the age criteria for a reverse mortgage. For eligibility, you can still carry a mortgage on your home, but you can't have a lien on your home. An attorney who specializes in estate planning will investigate whether your home is free of liens such as judgments against you by the IRS or a home owner association for unpaid HOA fees. According to an article by reversemortgageguides, you should know the reverse mortgage pros and cons before signing any paperwork. With home values high in California, it's a good time to look into reverse mortgages.
- The pros of a reverse mortgage
Some of the positives associated with a reverse mortgage include the fact that you get to stay in your home. If you have a mortgage, during closing you'll pay the balance using the reverse mortgage proceeds. As long as you live in the home and keep up with property insurance and property taxes, you'll be able to stay in the home without a monthly mortgage. You can also receive payments in a variety of ways including monthly payments, lump sum distribution, credit line or a little of each. According to an article by Zack's, a reverse mortgage gives you guaranteed income for life. The interest rate on your reverse mortgage could be lower than other loans. After paying off the reverse mortgage, your heirs get to keep the balance or remaining equity.
- The cons of a reverse mortgage
You will pay slightly higher fees on a reverse mortgage compared to a conventional mortgage including origination fee and FHA (federal housing administration) mortgage insurance. The longer you live, the more the value decreases for your estate and loved ones who will inherit the remaining equity. On the downside, a reverse mortgage can seem complicated. A piece by the AARP cautions senior citizens to carefully consider a reverse mortgage. The AARP suggests seeing if there are less costly options and making sure you understand how a reverse mortgage works.
If you are certain you want to stay in your current California residence as long as possible, a reverse mortgage could be right for you. At the Law Offices of James C. Shields, we provide top-notch legal support. We can help you make a reverse mortgage part of your estate plan. Our goal is to help clients leave a lasting legacy. For more information about reverse mortgage pros and cons, please contact us.