When presenting a reverse mortgage, the top arguments against one is how expensive they are. With cries like: “they cost too much”, I have to ask: “what are you comparing them to”?
Let’s examine some of the alternatives: One would be that you could move. What is the cost of moving? You can probably get a pretty accurate quote on what it will cost you to move out of your home, but more than the financial cost, what is the emotional cost? Most seniors have lived in a home for years and probably more like decades. Everything is where they want it, and the memories run deep. So is it worth moving and upheaving everything you know? If moving makes sense, there are additional factors to be considered.
If you choose to keep the home, you need to decide if a rental property is something you will want to deal with. You’ll need to consider the expense and hassle of screening tenants and time needed to clean up the property between each tenant when they move out.
If you are saying that you would never rent, and you would just sell your home, that brings us to another option. Supposing that you have already checked in to what it will cost to move, you will just need to add that number to the sales commissions of 5%-6% of the selling price. In addition to that, you will probably find that you will pay at least a small portion, if not the whole amount, of the closing costs for your buyer. Don’t get me wrong. I am not saying that selling never makes sense, because sometimes it is the best option. Be aware though, that it does cost money to sell.
So what are the fees associated with a reverse mortgage? Depending on your loan officer, the cost of a reverse mortgage is somewhere between 2% and 5% of the appraised value. You can see that it is actually cheaper to do a reverse mortgage than it is to sell. It is easier than moving, and you get a place to live for the rest of your life. To top it all off, the fees have been drastically reduced, and the interest rates are at an all time low.
As with anything, there are exceptions. In this case, if you are moving in the next few years, it probably does not make sense to do a reverse loan. I am not saying that someday you are thinking of moving, I mean that you a have a definite plan that says, “We are moving to a warm dry city 3 years from now”. Let me reiterate, have a definite plan.
Looking for more information on reverse mortgages? Getting educated on the reverse mortgage programs available will help you decide what is best for you. If you would like to see what you qualify for, try this FREE reverse mortgage calculator.
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