Pros and Cons of Reverse Mortgage
Reverse mortgages give hope to old seniors and individuals who are at least 62 years old to meet certain financial obligations by using the equity in their as cash. Retirement and old age is such a challenge without a regular source of income again. Meanwhile, reverse mortgages are a means of catering to obligations such as health care, purchasing a home, paying some debts, etc.
As with every financial tool, a reverse mortgage has its intricacies that must be clearly understood. The financial implications and effects of the loan should be examined by the potential borrower before obtaining it.
However, as good as a reverse mortgage sounds, it is expedient to consider its pros and cons before deciding to obtain it.
- You are eligible for the mortgage loan as long as you are 62 years old and have equity in your home.
- You do not have to make monthly payments, but you receive payments from the lender.
- Your current financial status or the account balance is not a requirement for eligibility as long as your home still has equity.
- Proceeds from a reverse mortgage are tax-free.
- There is no limitation on how you can use the proceeds from the mortgage loan.
- You can pay off an existing mortgage with the proceeds from the reverse mortgage.
- You still have title to your home until the reverse mortgage becomes due.
- Reverse mortgages do not affect your access to Social Security and Medicare.
- After paying off the mortgage loan and some equity remains, your heirs are entitled to it.
- If the payments you received are greater than the payoff balance, your heirs will not be required to pay offset the deficit.
- Many people lack adequate information and knowledge about the reverse mortgage before going ahead to obtain it.
- The costs and fees involved in reverse mortgages are higher than other traditional mortgages.
- Over time, the equity in the home gets used up as you receive payments.
- You may not be able to leave an inheritance for your children especially if the equity in your home is exhausted.
- Your access to Medicaid will likely be affected by a reverse mortgage, even though it does not affect your qualification for Social Security and Medicare.
- Before you are considered for a reverse mortgage loan, you must go for a mandatory mortgage counseling.
- You will continue to pay property taxes, insurance, and maintain the home until the term of the loan is reached.
- You cannot be absent from the home for 12 consecutive months under any circumstances.
- The loan becomes due, even before the end of the term of the loan, if you fail to meet the requirements of the reverse mortgage loan.
You are, however, advised to consider every term of the mortgage carefully before using it as a financial tool to secure your future. Ensure that the lender states all other requirements clearly to avoid any misconception.
Find out more about the Pros and Cons of Reverse Mortgages.
REVIEWS5(based on 1 reviews)
Looks like you put a lot of work in here. Great information and very helpfull Brandon 07/26/2016
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The services referred to herein are not available to persons located outside the state of California.
Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event. Some restrictions apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency.