Reverse mortgages are often thought of as a last resort for senior citizens who need to access the equity in their home. However, younger people are increasingly turning to reverse mortgages as a way to purchase an investment property.
There are a few things to consider before taking out a reverse mortgage to buy an investment property.
1. The type of investment property: The most common type of investment property is a rental property. But, you can also use a reverse mortgage to purchase a fixer-upper to flip, or a vacation property.
2. Your income: You must have enough income to cover the mortgage payments, property taxes, and insurance on the investment property.
3. Your credit score: You need a good credit score to qualify for a reverse mortgage.
4. The value of the property: The property must be valued at a certain amount in order to qualify for a reverse mortgage.
5. The terms of the loan: The loan terms will dictate how much money you can borrow, and for how long.
6. The fees: There are fees associated with taking out a reverse mortgage. Be sure to ask about all of the fees upfront so there are no surprises later on.
7. Your exit strategy: You need to have an exit strategy in place before taking out a reverse mortgage. That way, you know how you will pay off the loan when it comes due.
A reverse mortgage can be a great way to purchase an investment property. Just be sure to do your research and understand all of the terms and conditions before signing on the dotted line.