Why is reverse mortgage popular in the US? Benefits explained

Reverse Mortgage: A reverse mortgage is a loan for homeowners aged 62 and up who want to borrow against the equity in their home without making monthly payments. This mortgage product can assist seniors who are struggling to meet their living expenses. It can also help those who desire to diversify their retirement income and protect themselves against hazards such as market downturns and outliving their resources. Here is why it is Popular in US.

You do not intend to relocate anytime soon

If you're thinking about getting a reverse mortgage, you should anticipate on staying in your house for the foreseeable future. This rule of thumb isn't limited to reverse mortgages; it's also uncommon to obtain a new forward mortgage (such as a refinance loan) on a home you're about to sell. What's the reason? Loan closing fees.

Your partner is 62 years old or older

If you're married and your partner isn't yet 62, a reverse mortgage isn't the best option. Though new regulations may protect your non-borrowing spouse from losing the home if you die first, non-borrowers cannot get funds from the loan if the borrower dies. This means no more credit card withdrawals or monthly payments, and the surviving spouse may lose a significant source of income. If you and your spouse are both 62 or older and listed as owners on your home's title, taking out a reverse mortgage together could be a viable option.

You are capable of meeting both the financial and physical criteria of home ownership

If you have a reverse mortgage, you must keep up with your property taxes, homeowners insurance, and house maintenance. If you fall behind on your payments, the lender may declare your debt due and payable.

If you do not pay your property taxes, the county tax authorities have the authority to place a lien on your home, seize it, and sell it to reclaim the taxes owed. The tax authority's claim to your property takes precedence over the lender's. If you don't pay your property taxes, you endanger the lender's collateral (your house). That is why lenders require borrowers to pay their taxes on time.

Your house is merely an asset

Some houses are sentimentally valuable. If your family has owned your home for decades or centuries, your offspring may wish to preserve it that way. While there are ways for heirs to pay down a reverse mortgage while keeping the house, the loan complicates matters. However, if your property is merely an asset, then leveraging it for a more comfortable retirement may be the best way to use it.

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