Looking at media speculation regarding reverse mortgages, you will see both negative and positive insight. Reverse mortgages can be exceptionally useful for the right person, but for others, it may not be the best choice out there. This is why one needs to conduct proper research in terms of reverse mortgages as well as research on other options out there. One should also be very clear on the rewards and drawbacks of reverse mortgages.
Reverse Mortgage Pros
One of the main advantages of reverse mortgages is that you get to continue living in your home. You are also not required to make a monthly mortgage payment provided that you continue living in the home, do not sell the home, and do not become deceased. At the time of any of those three occurrences, a payment in full will be due including all interest charges and relevant fees.
- You have three different ways of receiving payment – a lump sum of cash, line of credit, of a monthly payment.
- The homeowner will never owe more than what the house is actually worth nor will the homeowner’s heirs after passing. This does not change no matter how high the internet rates rise, the amount of payments, etc.
- Reverse mortgages are easily approved since income and credit scores are not factors.
- The money that you, the homeowner, receive from the reverse mortgage is completely tax-free.
The money that is received can be used in any way that that you wish. Although, if a there is an existent mortgage on the home, then you will be required to pay that mortgage off in full once you receive the reverse mortgage loan.
Reverse Mortgage Cons
Simply put, reverse mortgages will be expensive. They have very high closing costs. These costs are normally at least double the rate that a traditional home mortgage would be.
By taking out a reverse mortgage, you are creating the possibility of not leaving the house to your heirs.
When taking out a reverse mortgage, you are entitled to abide by certain rules. You must keep all the terms of the mortgage up or the loan may become due in full at an early time. For example, you must maintain the up-keep and maintenance of the home as well as insurance on the home and property taxes paid up to date.
For seniors, a reverse mortgage (especially when taken as a lump sum and deposited into a bank account) could affect the eligibility of Medicare and other necessary programs.