List of Pros and Cons of Reverse Mortgages
If you are 62 years old (or older), approaching 62 years old, or if you watch daytime and/or late night television, then there is a very good chance you have at least heard of a reverse mortgage. There is plenty of information available about reverse mortgages available but it seems that every new piece of information you see contradicts the last. If you are considering a reverse mortgage, hopefully this will help with your decision. To help put your mind at ease, the writer or publisher of this review has no financial or other interests regarding reverse mortgages. This is an independent, unbiased review of the biggest advantages and disadvantages of a reverse mortgage.
To start, a reverse mortgage is simply a loan made to a homeowner based on their age, value of the home and amount of equity in the home. To be eligible you must be 62 years old and live in the home. If there is an existing traditional mortgage, the value of the reverse mortgage must be large enough to pay off the existing mortgage. Also, if obtaining a FHA/HUD approved mortgage, you will have to complete a counseling course prior to initiating the loan application.
List of Pros of Reverse Mortgages
1. Additional Retirement Income
This is the primary reason for obtaining a reverse mortgage. The additional income. This can allow the homeowner additional financial flexibility and/or independence during the retirement years.
2. Payment Options
The value of a reverse mortgage can be taken as a lump sum, line of credit or the most popular monthly installment payment. Again, flexibility is a wonderful thing.
3. Payment Deferral
Most homeowners defer repayment until they die. The loan also becomes repayable if you sell the home or move out of the home. This is particularly attractive for those with no heirs and/or those planning on staying in their home for life.
List of Cons of Reverse Mortgages
1. Fees
As with any loan there are costs associated with obtaining a reverse mortgage. Lenders often mitigate the risk of a reverse mortgage with higher fees which naturally reduce the amount of money you can actually use.
2. Taxes, Insurance and Maintenance
These remain your responsibility. Failure to keep current can result in the lender demanding repayment immediately. These costs should be considered when deciding to obtain a reverse mortgage.
3. Interest Rates
Interest rates are typically higher for reverse mortgages than traditional mortgage.