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Is it smart to replace your existing mortgage with a reverse mortgage loan?
The majority of seniors who get reverse mortgage loans are doing just that.
“Fifty-five percent of seniors who get a reverse mortgage are paying off a (conventional) forward mortgage,” says Stephanie Moulton, associate professor of public policy at Ohio State University, citing a recently released university report by the Michigan Retirement Research Center funded by the Social Security Administration.
Whether this is a solid strategy depends on your circumstances, your finances and your goals.
Reverse mortgage loans allow you to cash out a portion of equity and forgo payments. Credit requirements are often less stringent. They also have fees and interest (which can be higher than conventional loans), so it’s crucial to shop for the best rates and terms.
In addition, certain actions like falling behind on property taxes, property insurance or home maintenance can trigger foreclosure.
Here are three reasons to pay off traditional mortgages with funds from a reverse mortgage loan.