Reverse Mortgage Pros and Cons

Advantages and Disadvantages of Reverse Mortgages


We put together a list of Reverse Mortgage Pros and Cons so you can get a better idea about the Benefits of Reverse Mortgages and Drawbacks of a Reverse Mortgage.

Benefits of Reverse Mortgages

  • When looking at reverse mortgage pros and cons, there are many benefits to using a reverse mortgage. That is probably one of the reasons that so many people are using them every year. Numbers of those that are using them are doubling each year and there is good reason for this. A reverse mortgage is something that many people find benefits in for many reasons. Those that use these options for their funding needs often have the ability to do what they need to or what they would like to and still enjoy what life has to offer to them.
  • To get a reverse mortgage, you need to have equity in your home and be over the age of 62. This type of mortgage works opposite of others. Instead of making monthly payments on your mortgage loan, you are instead using the funds as you see fit and then the mortgage will be paid off after you die or move out of the home permanently. At that time, the home’s mortgage is paid off. Prior to this, though, there is no payment being made on the home.
  • A reverse mortgage is an option for many people. The funds that are obtained through a reverse mortgage can be used as the homeowner sees fit. Many homeowners willuse them to pay off debts. Others will use these to fund home improvement projects that they could not afford to do otherwise. Some will use these funds from their home’s equity to fund long term health care for themselves of their loved ones. The funds can be used in virtually any manner that the homeowner chooses.
  • Because of this, homeowners can easily benefit from obtaining this type of loan. Many people find this to be an option that they need to have. Often, people that find themselves not having enough money to make ends meet can tap into these funds to help them to make payments. Often social security payments, savings and pensions are just not enough to fund their needs. The reverse mortgage can be an excellent solution then.

There are several ways that the reverse mortgage can be funded as well. They can be funded through a lump sum payment that is made when the homeowners secure the mortgage. Or, the funds can be sent each month for a specific time or even for the rest of their lifetime. In any case, this type of mortgage allows many homeowners to secure the benefits of having added funds when they otherwise would not have it.

Drawbacks of a Reverse Mortgage

As part of looking at reverse mortgage pros and cons, we've pointed out above that there are plenty of benefits of reverse mortgages. They allow many homeowners to secure the funds that they need to make ends meet, to allow for long term care and to make home improvements. The homeowner decides what to do with the money that he secures. He also gets to tap into this equity without having to pay it back, in most cases. Those that find themselves in need of a reverse mortgage can secure it rather quickly, too. There are no credit or employment verifications needed. With so much going for them, it is obvious why these mortgages are being secured by so many out there.

Yet, there are some important things that should be noted about them prior to securing one.

  • When the homeowner dies or permanently moves out of his home, the home will need to be sold in order to pay off the mortgage. The mortgage will be due at this time, in a lump sum. If the heirs or the homeowner would like to keep the home, they will need to make payment on the home within a year of the mortgage coming due. In many ways, the heirs will be faced with having to make a decision about paying off the mortgage or selling the home.
  • There are quite substantial fees involved in these mortgages. In many ways, these are much more costly then those of a standard mortgage. There is an additional fee of two percent that is applied to an insurance premium. Another two percent will be used for a loan origination fee. On top of this, standard closing costs will be applied as well. In short, a $200,000 reverse mortgage may have $10,000 worth of fees involved with it. This will have to come off the loan prior to the funds being provided.
  • If the homeowner still holds a mortgage on the home when he seeks out the reverse mortgage, the mortgage will need to be paid off in full with the funds from the reverse mortgage and/or personal funds as needed.

When considering a reverse mortgage, it is very important for the homeowner to seek out the right loan for their needs. In most cases, this will mean talking to several lenders and their heirs to insure that everyone is on the same page. There are ways to save money too. For example, many state and local governments offer lower fees or even no fees on this type of loan. While there are many benefits to this type of loan, the homeowner still needs to weigh his decision carefully.

We hope this gives you a good overview and idea of the reverse mortgage pros and cons.




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