Reverse Mortgage

Pros and Cons of a Reverse Mortgage

Getting a Reverse mortgage can be confusing for a lot of senior homeowners today.? There has been so much talk about these mortgages that it?s become almost overwhelming.? Information provided here is intended to give you a ?real overview? of a reverse mortgage program, so you can make an intelligent informed decision.? These home mortgage programs are designed for Seniors 62 years and older.

For anyone considering a reverse mortgage, it basically comes down to whether it?s right for you, and what you want to accomplish.? Keeping that in mind, here is ?the good, bad and ugly?.

The Pros ? ?the good?

• Borrowers can use the funds anyway they want; supplement their incomes, pay unexpected medical bills, live a certain desired lifestyle or create more independence and security to avoid their children having to help them financially should the need arise.

• Borrowers do not have to repay the loan as long as they live in the home as their primary residence.

• Loans are not based on the borrower?s income and credit; only the age of the borrowers and current home value are considered; and loan proceeds can be paid in a lump sum or monthly payments

• If the borrower becomes deceased and the home is worth less than what is owed on the loan, this difference is made up by the FHA insurance on the loan. Heirs or the borrower?s estate are never responsible for the difference.? These are non-recourse loans, meaning the home stands alone for the debt.

• You still have the option to sell your home if you wish to move:? you repay the funds received from the reverse mortgage plus interest and any other fees due to the lender.? The remaining equity in the home, if any, belongs to you.

The Cons ? ?the bad and ugly?

• Costs associated with getting these loans are usually higher.? The FHA mortgage insurance and loan origination fee are the two highest costs.

• The loan automatically becomes due and payable if:? property taxes or hazard insurance is not paid; other obligations are violated; or if the borrower allows the property to deteriorate and does not make necessary repairs. Seniors with limited mobility or health conditions need to take this under consideration if they don?t have family members to assist them in maintaining the home.

• Loan must be repaid if borrower(s) die or sell the home.? If your intentions are to leave your home to children or loved ones for sentimental reasons, this loan may not be for you.

• You or the last living borrower must never live outside the home 12 consecutive months or the loan will become due.? A good example would be if you or the last borrower on the loan had to stay in a nursing home 12 months or longer.

• Equity is usually depleted; this is due to the interest and fees over the life of the loan. Generally, property values do not increase enough to offset the total costs.? Remember, the lender isn?t buying your home, it?s a loan with mortgage rates and fees associated with it, just like all loans.

NOTE: ?borrower? refers to those on the reverse mortgage loan, if two people are on the mortgage, stipulations must be met by both. The same applies if there is only one borrower on the loan but two people live in the home, if the borrower would decide to move or becomes deceased, repayment would be due in full.

For more reverse mortgage information, contact mortgage.org today!