Reverse Mortgage Pros and Cons

A reverse mortgage can be an important aspect of your retirement planning, giving you cash now and for the future. However, this type of loan is not for everybody. You need to understand the pros and cons of a reverse mortgage loan to help you decide if it is right for you.

The Pros of Reverse Mortgage

A reverse mortgage loan is a type of loan that can help homebuyers who are at least 62 years old to have a comfortable retirement.

They continue to live in their homes and continue to own the property. Just like any type of mortgage, the borrower must meet their loan obligation, make sure that the property taxes, insurance, homeowners association fees and the maintenance updated.

The borrower could choose how to receive the funds. It could be a line of credit, a lump sum, that you could tap as required. It could also receive it as a steady stream of payments per month for a certain duration or as long as you live in your house. It could also be a combination of all these options. Those who have chosen a fixed rate loan would get one disbursement lump sum payment. There are other payment options aside from all these but they are only available for an adjustable rate mortgage.

You can also use the funds that you get from the reverse mortgage Columbia to pay off your existing home mortgage. Although there remains a lien on your house for the remaining amount of the reverse mortgage loan, you won’t be required to pay the monthly principal and interest payments on the loan, and that means you will be freed from hassle of having to pay a monthly mortgage. Just like with any kind of reverse mortgage, you need to meet the obligations specified for your loan and that includes paying taxes, fees, etc.

Closing costs as well as ongoing fees including Federal Housing Administration, Mortgage Insurance Premium, could be financed using a reverse mortgage loan, which means out of pocket costs aren’t that high.

Loan proceeds are not taxable income. It will also not affect your Medicare and Social Security Benefits. But you should consult Reverse Mortgage Specialist to know the potential implications on your finances when you take out a reverse mortgage loan.

A reverse mortgage is considered as a non-recourse loan. Additionally, if the value of your house increases, then you should think about refinancing your reverse mortgage loan so you can access additional loan proceeds. Once you have repaid the loan, the remaining equity will be given to you or your heirs.

Cons of A Reverse Mortgage

The loan balance will increase as time goes by as the loan interest and other fees build up. As home equity is utilized, your heir would inherit fewer assets. You could still leave your house to your heirs however, they need to pay back the loan balance. In most cases, selling the house can pay off the loan. But you can also use a traditional mortgage or other funds.

Additionally, the fees associated with a reverse mortgage are higher compared to a traditional mortgage. The loan will become due and should be repaid if a maturity event happens like the last surviving borrower passes away, the house will no longer be the principal residence of the borrower, or the borrower vacates the house for over 12 months due to medical reasons or six months due to non medical reason. The loan would also become due once the homeowner is unable to meet the loan obligations. These include paying the insurance, property taxes, homeowners association fees, property maintenance, and more.

Call Reverse Mortgage Specialist if you wish to find out if this type of loan is suitable for you.

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/