Is a Reverse Mortgage Right for You?

January 05, 2013

chicago real estate mortgagesThe new year can be a great time for making changes to your home-related finances, but how will you know if a reverse mortgage is the right choice?

A reverse mortgage allows you to access a certain amount of your home’s equity through a monthly payment, line of credit or lump sum. The amount you can borrow for a reverse mortgage is based on your home equity, current interest rates and your age or if you’re married, the age of the youngest spouse.

Reverse mortgages are a good option for seniors who are 70 or older, who don’t have a lot of savings and plan on staying in their homes for the next several years. However, if you’re still in your 60s, a reverse mortgage may not be the best option.

Borrowers in their 60s will end up facing more years of compound interest, which can add up fairly quickly. Also, even with a reverse mortgage, homeowners are still responsible for standard housing expenses such as taxes and maintenance. For many retired homeowners, the better and more cost-effective option is to consider a traditional refinance or a home-equity line of credit (HELOC).

If you own real estate in Chicago and choose to apply for a reverse mortgage, make sure that you only deal with reputable lenders, as many predatory lenders have been trying to sell reverse mortgages to homeowners who can’t afford them. Visit the U.S. Housing Department website for more information on how to make the right reverse mortgage choice.

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