Why should you avoid reverse mortgage?

The reverse mortgage has gained interest in recent years. It seems like a good idea for many retirees. With a reverse mortgage, you can access your equity and the bank will make the mortgage payment to you. So, you can transform your home into a source of income. Though it seems like a good idea, according to financial experts, you should avoid the reverse mortgage. Here are some of the reasons why the reverse mortgage is not a good idea.

High fees

img-6

The reverse mortgage is a loan, so there will be loan-related fees. The origination and other fees on a reverse mortgage are high. A reverse mortgage is a home equity loan that is decided not on your credit score or income. So, there are risks associated with it. Lenders offset this risk by charging higher fees.

High interest rate

img-8

The interest rate on a reverse mortgage is greater than that of a traditional home equity loan. Eventually, you get little of your money, and the bank gets the bigger chunk.

Your heirs might not get the house

img-10

In the case of a reverse mortgage, the loan is paid off after you sell the house. So, if you die, the house will be sold to recover the loan amount. Your heirs won’t be able to have the house unless they pay off the reverse mortgage amount.

If you move out, you have to repay the loan

img-9

To repay the loan, you have to live in your home most of the time. If you haven’t lived in the house for a year, you will be considered ‘moved out.’ In such case, you have to start repaying your reverse mortgage.

You will be responsible for the home costs

img-4

You still have to pay the property taxes, pay the homeowners insurance, and pay the regular maintenance on the home.

A reverse mortgage is a loan against your home’s equity which you need to pay back. So, you should think carefully before getting a reverse mortgage.

Why is Salt Lake real estate market in good condition?

The housing situation is good in Utah. The demands of the home are high and the number of houses sitting idle in the market has become lower. The Salk Lake housing market saw a remarkable growth last year, and the same is also expected this year. According to the Salt Lake Board of Realtors, 13,323 existing single-family home were sold last year. This was the highest number in a decade and the third highest number in the Salt Lake County’s history. Last year, the market saw a growth of 22% over last year. This year also, a double-digit market growth is expected. Here are the reasons why the market is in such a good condition.

img-2

•    The high demand for housing is not limited to single-family homes only. There has been a huge demand for multifamily units like townhouses, twin houses and condominiums as well. This mainly accounted for the 22% growth of the real estate market.
•    The prices of the properties were also high. The median sales price for a single-family house was $272,000 which was 7% more than the previous year. The price of the multifamily unit was also up by 8%.
•    The number of homeowners having negative equity in 2010 was 21%. This has now dropped to around 4%.
•    In 2014, the median household income in Salt Lake County was $63,000. About 30% of this income was allocated as a mortgage payment. This year also, the affordability factor remains high. So, more people have the ability to pay off their mortgages.
•    There is now more demand for houses compared to the number of homes in the inventory. This had increased the prices of homes.

There has been a strong growth in the job market and the income of people has increased. These conditions are favorable for the real estate market in Salt Lake this year.