If you’re a homeowner over the age of 55, you may have heard of reverse mortgages.
Basically, a reverse mortgage allows you to access a portion of your home’s value to use as cash flow. One of the benefits is that you don’t have to pay any interest of principal back until you die or sell the house.
This is a popular tool seniors use to supplement retirement income that ended up being lower than they had planned, especially now when interest rates are low on investment returns.
While reverse mortgages allow you to borrow up to 50% of your home’s value, there are some risks you should consider if you want to pursue this route.
- First, interest rates are generally above market rates for reverse mortgages, which means you could be paying out extra in the long run.
- Second, because you can lock in for a maximum of 5 years, if interest rates rise again, you could run into financial trouble.
- Finally, if there is a market downturn and your home decreases in value, you will have to cover the difference out of pocket when you sell.
For some, reverse mortgages can offer the flexibility of staying in a home they’ve grown to love while providing extra income. For others, it might be wiser for them to downsize, sell the home, and invest the equity in a way to give them access to the money but also make interest work for them.
Contact us today to discuss if a reverse mortgage is right for you.