Reverse mortgage loans are designed to give older homeowners access to cash when retirement savings are not enough. While these loans may help you to make ends meet, they aren’t for everyone. You can find out if you qualify for this type of loan, and how your home equity translates into money by using a reverse mortgage calculator. Before you take out a reverse mortgage, you’ll need to understand the possible benefits and pitfalls. Here are a few things to consider when you’re planning your financial future.
Who Is Eligible for a Reverse Mortgage?
You’ll need to be 62 years of age or older and have a healthy equity in your home before you can get a reverse mortgage. Your home can be a single-family house, a condominium, a manufactured home, or a two- to four-unit residence where you’re living in one of the units. If you’re delinquent on any federal debt, you won’t be eligible. If your finances are such that even with a loan you won’t be able to pay your bills, then a reverse mortgage doesn’t make sense for you, and you won’t be able to qualify. You’ll need to have the means to pay property taxes, homeowners insurance, utilities, home maintenance, and the other bills associated with your house. You’ll also need to have the ability to cover your living expenses.
How Long Will You Continue to Live in Your Home?
If you plan to stay in your home for many years, and you will be able to continue paying your bills for the entire time, then a reverse mortgage may be the right option for you. However, because there are costs associated with borrowing money, if you’ll be living in your home for only another year or two, then taking out a loan on your equity doesn’t make sense for you.
Preparing to Meet With a Financial Counselor
Before you can get a reverse mortgage, you’ll have to attend a counseling session. This session is required for all borrowers and is provided by a third-party mortgage counselor, independent from your lender. Counseling is meant to ensure you understand what these types of loans entail. You’ll need to bring some of your financial information. Bring documents that show your home’s value, your income, debt, and expenses. Anything you can bring to help your advisor gain a clear picture of your financial status is helpful.
There are both costs and benefits to taking out a reverse mortgage. After meeting with a counselor, you’ll have a better idea of whether this type of loan is right for you.