Even the term ‘reverse mortgage’ seems a little odd. But, there are some things that you need to know about this critical economic term. A reverse mortgage is an excellent way to release equity in your home. So, if you have a property that has a lot of equity within it, but you don’t know how to release it the reverse mortgage could be a great way to do this. Of course, this should be treated with caution. As with any major financial decision that you make, you should be armed with all of the facts.
Let’s cut to the chase and find out more about reverse mortgages.
The Fact from the Fiction
Reverse mortgages are an excellent way to help those who are on the cusp of retirement free up cash on their home. If you are looking for a way to boost your pension fund, then this could be the answer to all of your financial problems. Many view a reverse mortgage as a positive way to release money into their bank accounts.
But, they can be an expensive way of releasing cash. In some circumstances, a reverse mortgage can carry high costs. These are referred to as stiff fees. What is more, these stiff fees can be 10% more than traditional mortgages. It’s worth thinking about your options before you commit to a reverse mortgage.
Is it Really a Cash Generator?
For many retirees, they see a reverse mortgage as a way of generating funds when times are hard. But, if you don’t have the money to pay for upfront costs, this can be an expensive way of generating revenue streams. What is more, if you only require a nominal loan, this can be a costly endeavor all round. Plus, if you are planning on moving during your retirement, this kind of mortgage should not be sought out. Take a look at this reverse mortgage guide here for more in-depth financial information.
Many people, however, believe that this is an excellent way to make the most of your collateral in your retired years. You can ensure that you have a smoother flow of income. If your pension pot is not as full as it should be, this can ensure that your income is topped up. For many, this gives a greater peace of mind and a higher quality of life.
Flickr: American Advisors Group
Property Ownership and Rights
One of the biggest misconceptions homeowners believes is that they have to relinquish control of their property when they have a reverse mortgage. This is not true. Despite taking a loan out from your property, you are still in control and ownership of your home. So, you don’t have to worry that you are giving away your children’s inheritance. However, you must ensure that you keep the property in a good state of repair. Essential maintenance must be carried out, so the house is in premium condition. What is more, all taxes are still your responsibility, so do make sure that these are paid alongside your other bills.