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April 9, 2017
People who are thinking about getting a reverse mortgage sometimes feel confident, smart and stress-free one moment and overcome by doubt the next.
Here are 5 tips to help you make a better reverse mortgage decision.
Your home is probably your most valuable asset — often worth more than your retirement savings. It is therefore probably worth your while to learn about your options for using it to help you have the best retirement possible.
When you get a reverse mortgage, you are borrowing your own home equity. What makes this financial transaction different from most other loans is that you don’t make any monthly mortgage payments — the loan is repaid (usually by selling the home) only when you move out but neither you nor your heirs will ever owe more than the value of your home at the time the loan becomes due.
Misconceptions about reverse mortgages are common. As an example, a survey conducted by Davidooff, Gerhard, and Post found that only one third of the respondents knew that reverse mortgage borrowers can stay in their home even if they owed more than it was worth. Learn more about the pros and cons of these loans or discover 3 underreported facts about reverse mortgages.
You can read articles about reverse mortgages, but using different kinds of reverse mortgage calculators can be one of the best ways to get your head around how these loans work. Calculators can enable you to discover how these loans will impact your own life — these tools can make the loans more understandable and personal.
Try one of these options:
One of the most common complaints about reverse mortgages are the upfront costs.
Human beings are programmed to give too much weight to the short term gains and losses. So, many people reject a reverse mortgage because there are upfront costs associated with the loan — even though there will be financial benefits for years and years to come.
Expert analysis suggests that if you will benefit from a reverse mortgage for at least 5 years, then the upfront costs should be considered negligible. Explore this complete guide to reverse mortgage fees.
Your home can perform various functions in retirement. Your home is a place to live and a source of emotional comfort. It is also a potential source of money to fund future medical or long term care costs as well as a possible asset to pass on to heirs.
Balancing the various functions of your home — both now and as you age — is one of the most important reverse mortgage considerations. When and how to use the funds from a reverse mortgage can impact how you live now and well into the future.
Research from the Boston College Center for Retirement Research has found that fear and misunderstanding do indeed cause inertia and make people avoid these loans even though they are a rational smart choice for many seniors.
Start exploring the impact of a reverse mortgage on your retirement.
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