The Pros and Cons of Reverse Mortgages

There are a number of reverse mortgage advantages and disadvantages that any homeowner should know about it. There are thousands of salesmen out there who will expound how great they are and how you should apply for one straight away, and for this reason I have concentrated more on the cons of this special kind of mortgage.

The pros of reverse mortgages –
Homeowners can easily obtain a reverse mortgage. There are no credit or income requirements to think about, such a mortgage can be obtained whether the home is financed or mortgage free. Such ‘loans’ mean that borrowers can do needed work on their homes, travel, send their grandchildren to college, and pay for unexpected medical expenses.

Homeowners will never have to think about making their monthly mortgage payment. As reverse mortgage loans are government insured, and so the funds will always be there. If payment is not received on time, the bank pays you charges! Banks often freeze lines of credit, but these mortgages will always be available.
Reverse mortgage disadvantages –

Reverse mortgages are expensive loans. The initial costs can be high because of the origination fee and the mortgage insurance. A reverse loan taken on a property worth around $400,000 could cost up to $2000 in fees alone, although this does depend on how high the tax stamps are.

Whilst you do not have to pay these fees straight away, they are put onto the loan balance. This means that if you are looking for a short-term solution, a reverse mortgage is absolutely not the right loan for you.

If you are a senior citizen, and you are not paying off a mortgage, and take all the funds up front for a variety of purposes, reverse mortgage loans might not be for you. The reason is that if you put all of your funds into a bank, you might become ineligible for Medicaid. Also, remember that there are a lot of people who will be happy to part you from your money. You might be advised to invest money into one that is way to risky for you, or worse, someone could try to outright steal the money.

Also of concern is that by borrowing only on the older borrower of a couple you can get more money. However, this can be risky as if the older spouse passes away first, the younger spouse could be left with funds which mean that they cannot get their own reverse mortgage, and they have to move.

So remember, despite all the sales talk that you will get, you need to do a lot of research to find out if such as mortgage is right for you. As there is so much at stake, you should really get advice from an independent professional whom you can trust.

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