Despite representing an “alluring” proposition for those looking to increase their cash flow during retirement, CNBC outlines some considerations for borrowers seeking a reverse mortgage. Among the advice: put it off, evaluate fees, consider different reverse mortgage types and consider health care needs.
Additionally, the article, originally written by the Associated Press, warns against taking a lump sum payout and delaying the use of a reverse mortgage until later in retirement.
The loan and fees are due once all parties listed on the deed die, or the home is vacated for 12 straight months. The home is usually sold, and the proceeds from the sale are used to pay off the loan, plus interest and fees.
The interest on the loan balance is typically calculated monthly and accrues over time. So, if you elect to receive regular payouts, for example, the amount you owe, plus interest, grows. When the loan is repaid, the lender also collects all the compounded interest.
Here are six tips experts recommend when considering whether to get a reverse mortgage:
1. Put it off: Even though homeowners can qualify for a reverse mortgage as early as age 62, experts suggest putting it off as long as possible.
The longer you wait, the more you can borrow against your equity. You also stand to save more money on interest if you put off the timing of the loan or when you start receiving payments. Since, the longer the loan period, the more interest adds up…..
Written by Elizabeth Ecker