Reverse Mortgage Pros And Cons
Is A Reverse Mortgage Your Best Bet?
Get a better understanding of reverse mortgage pros and cons before making up your mind whether to apply for a reverse mortgage or not, weigh your options.
Reverse mortgages offer some great benefits to elderly homeowners but there are some drawbacks to be aware of before you make a decision.
Many senior citizens who were eager to increase their retirement income have been victimized by reverse mortgage scams because they didn't know how a reverse mortgage works and were not aware of reverse mortgage facts before they committed to the scheme.
Reverse Mortgage Pros and Cons
1. A reverse mortgage lets you earn a monthly income on your home while you continue living in it. You maintain your lifestyle and enjoy your retirement out of the asset which you have worked for all your life.
2. The income you get is tax free. You get every dollar that you stand to receive each month or in the form of a lump sum in full.
3. Even if the value of your home comes out less than what you owe at the end of the loan, you don't have to pay the difference. This will be true for you and your heirs in the event of your death.
4. You get monthly payments until you decide to sell the house, move to another place, or pass away. This guarantees your security for as long as you live.
5. Your credit situation and income profile will not get in the way of securing a reverse mortgage loan. As long as you have enough home equity, you will qualify.
1. Up-front fees and closing costs are almost double that of a conventional mortgage. Not knowing the reverse mortgage pros and cons especially its usually hefty fees can make you pay much more than you usually do.
2. You need to keep your home in good condition and pay property taxes as they fall due. This means allotting a good portion of your monthly income to pay maintenance costs.
3. There may not be much left for you or your heirs once your home is sold and the loan is deducted from the proceeds. This could be a problem if you or your loved ones have nothing else to fall back on aside from the sale of your property.
4. Your ability to avail of new credit is limited while the reverse mortgage is in effect. You will not be able to tap new sources of financing such as car loans, credit cards, and personal loans.
5. Reverse mortgage lenders will require you to maintain mortgage insurance on your home. This is their protection in case your home's value is less than what you owe at the end of the reverse mortgage period.
Now that you know the reverse mortgage pros and cons, you're a step closer to making an informed choice. But of course, the deciding factor would be your reason for wanting to get a reverse mortgage loan in the first place.
If you need a lump sum to pay for a medical treatment, a reverse mortgage loan is an excellent source of funds which you can avail of rather quickly.
If, on the other hand, you want to make sure of leaving something substantial to your family when you pass away, a reverse mortgage loan may be an idea that you should think twice before accepting.
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