Are Reverse Mortgages Right For Seniors?
Are Reverse Mortgages Right For Seniors? – In today’s world, reverse mortgages are becoming an extremely popular trend as many seniors are starting to catch on. Reverse mortgages are a great way to supplement your current income. However, it also has it’s disadvantages just like anything else. So what are the reverse mortgage pros and cons?
Pros and cons of reverse mortgages for seniors
Well, there are some costs involved. costs such as insurance, an appraisal, a recording fee, origination fee, and other fees involved. While there are many fees involved, all of these costs can be financed through the loan. The other thing you have to think about is all of the equity in your house will be gone, and if you have children, whether or not you will have something to leave them in your will. You may however have non supportive children and do not care one way or the other.
- Perhaps the greatest benefit is that a reverse mortgage is a tax free supplemental income that comes in month after month without you even thinking about it, and for a s long as you live.
- You can continue living in your home without a mortgage payment.
- You get the fortunate option of receiving the funds in a lump sum, monthly payment , or line of credit. By having these three options, it leaves you in a better financial situation.
- Even if you have spotty or horrible credit, you may still be eligible for a reverse mortgage.
You don’t have to worry about the payments you receive affecting your medicare or social security benefits.
- Just like anything else in life, there will be drawbacks. One of those being that a reverse mortgage will costs you in closing fees. Every bank and institution will be different, there is no way of knowing how many fees there are or how much they will be. Most banks allow you to finance the closing costs as well.
- Although it most cases a reverse mortgage will not affect Medicaid or SSI benefits, some states have different laws and it could possibly reflect on that.
Disadvantages And Advantages Reverse Mortgages Right For Seniors
If you are a senior citizen looking for a stable source of income, then a reverse mortgage may be just what the doctor ordered. To learn the reverse mortgage disadvantages and advantages, keep reading. Its one of the most unique types of loans available to senior citizens 62 years of age and older and it is basically a loan against the equity in the home. If you think of how a traditional mortgage works – which works to build equity in the home while you while the borrowers income is used to pay the loan back. thus, the more income that goes to pay of the mortgage, the more equity you are building up. So when you think of reverse mortgages how they work, it is essentially reversed from that of a traditional mortgage. These two types of loans have many strengths and weaknesses, so before you make a decision, it is important to know the reverse mortgage advantages and disadvantages.
For starters, a reverse mortgage is a loan that is tax free and is only repaid when the person who borrowed the loan dies or sells the house. When this happens the reverse mortgage must be paid in full. Also, unlike traditional mortgages, a person who is thinking of a reverse mortgage must meet with a reverse mortgage counselor.
One of the many reverse mortgage disadvantages is that you must understand that there will still be certain costs involved in the process. Application fees, closing costs, insurance, appraisal fees, credit report fees, etc. While a reverse mortgage does allow you to still live in the home, you are still responsible for property taxes, insurance, and repairs. Should you not be able to maintain your monthly payments, the loan could become due in full. Most of the mortgage costs however can be financed through the loan itself. (excluding property taxes, etc)
The total amount a borrower can receive depends on the borrower’s age, the type of reverse mortgage selected, the equity in the home, the interest rate, etc. A borrower can receive payment three kinds of ways: a large lump-sum payment; fixed monthly payments, a credit line, or quite possibly any of the above. A lot of borrowers go for the line of credit option, as this allows them to borrow the money whenever they need it.
Who Is Eligible For A Reverse Mortgage?
If you are thinking of getting a reverse mortgage how they work, then you must know the eligibility requirements. If you are the owner of the home then you must occupy the residency and claim it as a principal residence, or in other words, live their for the majority of the year. If you are the borrower, then you must be at least 62 years of age or older.
Why You May Need One Reverse Mortgages
If you are over the age of 62 and find yourself in a situation where you need more money to meet your monthly expenses, then this type of mortgage may be exactly what you are looking for. This is a small part of reverse mortgages how they work.
For the most part these types of loans do not need to be paid back as long as you live in the home and claim it as a primary residence. The longer you dwell in the home, the bigger the loan becomes. Additionally, as the loan increases, the equity you have built up in your home decreases. Generally speaking, its more expensive in the younger years of the loan, and becomes less and less expensive over the course of time. if you have been researching reverse mortgages, then you may have heard of HECM (Home Equity Conversion Mortgage), which is way less expensive than a traditional private reverse mortgages how they work.
How Much Money Can A Homeowner Receive?
There are many things which will determine how much money you will get including, but not limited to, the borrower’s age, how much equity is currently in your home, and the loan program you decide to go with. You will need to contact a reverse mortgage counseling specialist to see if a reverse mortgage is right for you. if you need to dramatically supplement your current income, then reach out and talk to a counselor today. This is, basically, reverse mortgages how they work in a nutshell.
Is Reverse Mortgages Still Right For You?
Now that you know the reverse mortgage pros and cons, it is just a matter of discussing your own situation with a reverse mortgage counselor. There are many available in your local area or you could search online. Reverse mortgages do work for people in special situations, but the end cost is very high and should be thoroughly investigated before making any mortgage or loan commitments.