November 25, 2019
Reverse mortgages can provide much needed assistance in a retiree’s financial outlook, and can certainly help you pay off the mortgage and age in place. But there are a few situations where a reverse mortgage might not be the best option.
Relocating Is In Your Plans
If you plan on someday moving closer to family or to a more desirable climate to enjoy your golden years, taking out a reverse mortgage on your current home may not be a great option. A reverse mortgage loan becomes due once the borrower moves or passes away, so taking out a loan when you may be in need of cash only to have the loan due as soon as you go to move could be a serious issue.
In a situation like this, a homeowner may be interested in learning about a Home Equity Conversion Mortgage Purchase. This option allows a homeowner to buy a new home at the same time as a reverse mortgage is taken out, rolling what would ordinarily require two closings into one transaction!
Property Maintenance is Becoming Difficult
If the required effort to maintain the property is becoming difficult, a reverse mortgage may not be ideal. A reverse mortgage is insured by the Federal Housing Administration, and all FHA-insured mortgages require the insured property is maintained to the agency’s standards.
You Are Feeling Pressured
If your broker or lender is pressuring you to finalize the loan—or are suggesting you invest the reverse mortgage proceeds—take that as a sign that they may have an ulterior motive and may not be acting in your best interest. Licensed reverse mortgage brokers are prohibited from selling other financial products.
You Have A Life Insurance Policy
If you are a retiree in need of funds and would rather not tap the equity you have worked so hard to build in your home and you have a life insurance policy, a life settlement may be a great option to explore. A life settlement allows a life insurance policy holder to sell their life policy to a third party for more than the cash value of the policy, but less than the death benefit. Many retirees in need of funds, whether it be to age in place or pay off a medical debt, will simply lapse or surrender their policy to do away with the premium payment burden and never knew they had the option to sell the policy through a life settlement.