Turning Disadvantages Of A Reverse Mortgage To Your Advantage
When it comes to a reverse mortgage, wise consumers weigh the
advantages and disadvantages of a reverse mortgage prior to
signing on the dotted line.
Let’s start on a positive note, you could do what most borrowers
do and opt for the reverse mortgage line of credit. Just think
about how you would then be able to draw on the loan whenever
money is required for daily living expenses, medical bills,
prescription costs, home repairs, etc. A reverse mortgage could
really enhance your retirement years including in-home care
expenses in later years.
Furthermore, your reverse mortgage income does not affect regular
Social Security payments or Medicare benefits. And lenders cannot
foreclose on the loan for the life of the borrower.
Okay, that’s all well and good but how do I turn the major
disadvantages of a reverse mortgage into a positive? It’s all in
the perspective. For every negative there is a positive to
obtaining a reverse mortgage.
It’s true a reverse mortgage loan may affect your eligibility for
state and federal government assistance programs such as Medicaid
but it also gives you an important financial cushion and does not
(as mentioned above) affect your regular Social Security payments
or Medicare benefits.
You also have no monthly payments to make. Granted, the amount
you owe continues to grow larger over time but you also have more
cash on hand to enhance the quality of your current lifestyle.
Look at it this way, you will now have all the money you need
(and want). After all, it’s your money. True, you won’t have the
full selling price of your home to leave your loved ones but if
they’re financially sound in their own right, do they really need
a substantial inheritance?
It all comes down to what’s important to you, what your current
financial needs are and if leaving money to heirs is something
you feel you need or want to do.
Now let’s take a look at the basics of a reverse mortgage.
A reverse mortgage is essentially a special type of loan that
seniors can use to convert the equity in their homes to cash. At
one time, the only way to get money from your home was to sell it
and move or borrow money against it.
One of the pros of a reverse mortgage is that you continue to own
your home and the lender instead makes payments to you.
Certain qualification requirements must be meet in order for
reverse mortgage loan to take place.
All homeowners looking to obtain a reverse mortgage loan must be
at least 62 years old.
Anyone seeking a reverse mortgage loan must undergo
mandatory counseling from a HUB (the U.S. Department of Housing
and Urban Development) approved counselor prior to actually
applying for a reverse mortgage. This counseling is essentially
an in-person or telephone session that outlines the process and
is used to determine eligibility.
As with a conventional mortgage there are certain costs involved
in the reverse mortgage process. Costs may include application
fees, closing costs, insurance, appraisal fees, credit report
fees, and quite possibly a monthly service fee.
A reverse mortgage loan requires no repayment for as long as
you live in your home. When the home is sold and the borrower
moves, or the last living borrower dies, the loan must then be
repaid. In most cases, the home is sold to repay the mortgage.
The borrower however is still responsible for property
taxes, insurance and repairs. If these payments are not
maintained, the loan could become due in full.
As discussed previously you need to seriously examine any
disadvantages of a reverse mortgage as well as any advantages.
Disadvantages of reverse mortgages could include tax consequences
but remember a reverse mortgage is not classed as taxable income.
Your perspective and how you want to make your home work for you
is the key to using a reverse mortgage to your benefit.
Please know too that the amount of money you may receive from a
reverse mortgage depends on several factors of which include
your age and the type of reverse mortgage selected as well as
your appraised home value and current interest rates. As a rule,
the older you are, the more valuable your home and the less money
you owe on it – the greater your pay out would be.
That said, you need to determine for yourself if the advantages
outweigh any disadvantages of a reverse mortgage. Remember, it’s
a personal choice. What might be right for one homeowner may not
be right for the other.
The bottom line is a reverse mortgage can be a beneficial loan
product when entered into with a full understanding of the
advantages and disadvantages of a reverse mortgage. For seniors
who are in need of money to cover growing expenses and to enhance
the quality of life in their later years it can be a real