You have been save your whole life for retirement, but when the time comes, sometimes you can find that your nest egg is not quite as big as you expected it to be, or that your expenses are higher than you thought. Fortunately today there are things you can do to help increase your retirement income without going back to work. One of the most popular, and perhaps one of the most widely advertised in recent years, is a reverse mortgage. While this is not necessarily the right choice for everyone, it might be an option for you. Here are some questions you can ask to find out.
1: Is This Something You Need?
A reverse mortgage is a great tool to help someone who is unable to meet his or her living costs and needs on their current retirement income. If you’re just getting it because you want to have extra cash to take a big vacation, or you’re planning to take the money and invest it elsewhere, there might be better options out there. As with any loan, there are costs associated with a reverse mortgage in Utah, so the benefits need to outweigh these costs.
2: Have You Calculated the Costs?
There are generally two types of reverse mortgages: one that you get the money upfront, another that you get paid over time.
For upfront loans, you will have to pay lender fees, mortgage insurance (based on the size of the loan), and closing costs. You may be able to pay these costs out of your loan fund, but that means you will get less cash from the transaction, and you will pay interest and ongoing mortgage insurance on those costs.
Loans paid over time will have costs associated with interest and ongoing mortgage insurance premiums—both based on the current loan balance. The exact interest rate depends on your reverse mortgage lender, so be sure to compare rates. For that reason it’s important not to take out a bigger reverse mortgage loan than you need.
3: Should You Use Your Home Equity Now?
Getting a reverse mortgage today means you will have less home equity to work with in the future, and if you need that money for future living expenses, healthcare, or another emergency it won’t be available to you. For that reason it’s important to evaluate whether you need the income now and wait before you get this type of mortgage if you don’t think you need it.
4: Do I Know How These Loans Work?
One of the most important things to determine before you get a reverse mortgage in Utah is whether you truly understand this type of loan, the costs, and what it will provide. They are different from traditional loans, so if you’re unclear about any of the costs or benefits, talk to your lender right away.