How to Consider a Reverse Mortgage
- 1). Find out how much money you can receive from a reverse mortgage. The amount will be determined by the value of your home and the prevailing interest rate, as well as your age, or the age of the younger partner if you and your spouse are applying. Other factors to consider are the amount, if any, that you still owe on your home and the lending limit of local lenders. Generally, the more your home is worth and the older you are, the more money you can expect from a reverse mortgage.
- 2). Determine how you would like to be paid. There are several payment plans available. You can either receive the net proceeds as a lump sum, obtain a line of credit that you can draw down as you need funds, receive a monthly payment either for as long as you live in that house or for a set term, or a combination of these options. More than 60 percent of borrowers opt for the line of credit.
- 3). Assess the likelihood of leaving any equity in your house to your heirs. There are a number of factors about a reverse mortgage that you must consider. When you vacate your home or when you die (or when your surviving spouse dies), the property will ordinarily be sold and the lender will receive the accumulated interest and the fees due him. If there is money remaining, it will be paid to your heirs. If you live to a ripe old age, such a payment to your heirs is unlikely.
- 4). Learn more about reverse mortgages before you proceed. Counseling is an important part of this federal program and you will be required to learn about various aspects of reverse mortgages before you sign up. Reverse mortgages are quite complicated and have both financial and tax consequences, thus the requirement that you must seek out a HUD-approved counseling agency before obtaining one.