A reverse mortgage is the opposite of the loan option where you try to buy your home.
You have to pay monthly installments in the mortgage loan option, while a reverse mortgage phenomenon is an opposite. The reverse mortgage option is only for senior citizens who want to claim their equity without selling their houses. They can choose to have different options like lump-sum payment of the equity of their house, monthly annuity, or the line of credit.
This lucrative option has a lot more to offer but beware of the hidden charges. Some complex terms might leave you with less amount than you had anticipated. There are five essential things that you need to look for and do your part to manage before getting a reverse mortgage. There are high chances that without a financial advisor or some understanding of these factors, you would end up getting far less amount than you have bargained for.
Know about upfront and extra fees
Reverse mortgage seems a dream come true for older adults who want to have something to pay their regular expenses. If you have nothing left to support you, a reverse mortgage can cover your monthly expenses without any hassle, but here is a catch that you must know before getting this offer. The reverse mortgage comes with several different charges. Your lenders are not doing everything free for you. Before giving you the money, there are different charges that you will have to pay. The first thing is the appraisal fee $300 minimum that you must pay.
Then comes the hefty origination fee that is 2% of your property’s total value, which has a maximum limit of $6,000. Finally, don’t forget about the mortgage insurance that is a painful thing for some homeowners. The taxes and insurance will add to the charges that will reduce your anticipated amount to a certain low level. You will regret the rest of your life if you haven’t learned and accepted these fees as the trade-off to the reverse mortgage offer.
Who owns the house?
The most important thing about the mortgage after the hidden charges is the ownership of the house. Things might seem straightforward if you live with your spouse and the house is only to your name. But this is the worst mistake that you are making in this mortgage process. A homeowner can live in the house for their entire life when they go for a reverse mortgage. But this only implies to the owner. Any relative living in the house will not secure the right to stay in the property after the owner’s death.