Using a Reverse Mortgage for Debt Consolidation
By Francine L. HuffMortgage Credit Problems Columnist
If you have bad
credit, a reverse mortgage can help you with debt consolidation and allow you
to continue living in your home. The catch is that reverse mortgages are only
available to people 62 and older who own and live in their home. The following
tips will help you determine if a reverse mortgage is right for your situation.
What Is a Reverse
Mortgage?
If you've lived in your home a while, you've probably built
up a decent amount of equity in it and can apply for a reverse mortgage loan.
This type of loan can help you fix poor credit by turning this equity into cash
while continuing to live in your home. In a nutshell, you reap the benefits of
selling your home and getting a home equity loan without having to move. There
are no credit or income requirements and you don't pay back anything until you
sell your home or move out. Two reverse mortgage programs to consider are the Home
Equity Conversion Mortgage (HECM) through HUD and the Home Keeper Mortgage through
Fannie Mae.
Paying the Price
If you choose to get a reverse mortgage you can use the cash
for anything you choose, including debt consolidation. However, expect to pay
high closing costs, a big drawback if you don't plan to stay in your home for
very long. If you plan to move within five years you may want to consider a home
equity loan or some other method to fix your poor credit.
Jumbo Reverse
Mortgages
If your home has a high value, generally above $400,000, you
may want to apply for a jumbo reverse mortgage that will be backed by a private
company instead of the government. Depending upon your zip code, the value, and
the age of your home, you may be able to borrow a lot more through a jumbo
mortgage program than through the HECM or Home Keeper programs.
If you're over 62, don't plan to move anytime soon, and have
a lot of equity in your home, a reverse mortgage could help you with debt
consolidation. But before taking out a reverse mortgage make sure you've
researched other alternatives to fixing your bad credit.
Sources
New
Retirement
Housing and Urban
Development
Fannie
Mae
About the Author
Francine L. Huff is a
freelance journalist and the author of The
25-Day Money Makeover for Women. She
has appeared on a variety of TV and radio shows.
About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.
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