I have been asked with some frequency the following question, “is a reverse mortgage good for me?” My usual answer is – “It depends”.
It depends on individual circumstances – your individual circumstances. Ultimately, taking out a reverse mortgage or any other loan for that matter should improve your finances. Otherwise, why do it?
So here’s a couple of rules of thumb to keep in mind when considering a reverse mortgage.
One good reason to do it is to improve monthly cash flow. You must first take a good look at your monthly budget and see if the reverse mortgage helps you to be able to meet the blance of your obligations.
A second reason for getting a reverse mortgage is for financial planning. This is more of a piece of mind reason. The reverse is used a a standby line of credit to be used when other investments are performing poorly.
A third reason for taking out a reverse is to avoid the possiblility of a foreclosure or other severe situation. Sometimes bad things happen to good people and a reverse mortgage just might help get you over the financial hump.
A reverse mortgage might not be a good for you if you are concerned about leaving your heirs as much money as possible. Sometimes there is a child or grandchild that has special needs and would have difficulty making it on their own. A reverse mortgage will use up a portion of the equity in your home. While the home always remains in your ownership, there will be less money to leave behind when you are gone if you have a reverse mortgage.
One more reason for not getting a reverse mortgage. If the loan does not allow you to have enough cash flow to meet your financial obligations it most likely is not a good idea to get the mortgage.
Remember, the reverse mortgage is there to help you improve your financial well being. If it can’t provide enough resources for you, it just might not be worth it.
Let me know your thoughts or feel free to ask questions.