Many people get reverse mortgage loans to fund their nest egg. But these loans are not something to be taken lightly. It is important that you know what you’re getting into before you sign that title over the equity in your home. The monthly payment for a reverse mortgage is usually quite a bit higher than it would be for a regular, fixed rate loan. But if you use the money wisely, you could end up making these payments more affordable, even if the initial payments seem exorbitant.
In general reverse mortgage loans are not the best ways to raise money for personal use, but they can be a very valuable tool for securing financing for a home improvement project or paying off existing debts. Reverse mortgage loans also come with variable interest rates. The exact amount that you will pay in interest each month will depend on several factors, including how long you live and the current interest rates.
These rates are often rolled into the initial loan itself, so the payments tend to compound on the balance. Typical variable interest rates for reverse mortgage loans include: September rate = 0.50% per year; six-month term rate = 0.60% per year; and ten-year term rate = 1.00% per year. You should always make sure that the interest rate you’ll be charged is right for your situation. There are many advantages to using reverse mortgage loans to secure additional cash for your home.
The most obvious of these is the ability to increase the equity in your home with a relatively low-interest loan. However, there are other benefits to reverse mortgages as well, including the fact that they don’t need to be repaid for as long as traditional mortgages. This can be a great option for elderly homeowners, who may have other financial obligations that require their attention. In addition, you have the opportunity to build equity in your home while continuing to live in it for the rest of your life.