Pros & Cons of Reverse Mortgages
The FHA (Federal Housing Authority) has set some standards for the HECM reverse mortgages and so the involvement of this government agency has produced a safe and balanced reverse mortgage loan that can be availed of by seniors.
Here are the upsides of getting a reverse mortgage:
There is no need of monthly payments to be made after a senior gets a reverse mortgage. The senior is never asked to pay anything monthly while continuing to reside in the home that has been reverse-mortgaged.
The title to the home is not transferred to the lender, so it is a big advantage to the borrower. The equity remaining in the property is still that of the senior citizen borrower. The lender does not take the title on the home or the remaining equity on the property when giving a reverse mortgage on the said property.
Also, the senior is protected financially, because he or she does not ever owe more money than what the home is worth. HECM’s reverse mortgages are “non-recourse” loans. This means that, no matter how long you stay in the same home, you are not obliged to the lender to pay anything more than the value of the property, even if the loan amount actually exceeds the value.
Another advantage or upside to getting a reverse mortgage is that, it will not affect your Medicare or Social Security benefits payments, and you can continue to receive them as well.
For qualifying for a reverse mortgage, you need to be at least 62 years of age and have existing value equity in your own home or property. You do not need to prove any source of income or need to have good credit history or record.
The reverse mortgage lender will determine your eligible loan amount based on the value of the home and your age at the time of application. Also, the money you get from a reverse mortgage is fully tax-free income. You can choose how you want the money - as lump sum payment, monthly payments, or as a line of credit or as a mixture of all three.
The funds from a reverse mortgage can be used anyway you want to. You need not rely on your children to support you financially to live the life you want. FHA (Federal Housing Authority) insures these reverse mortgage loans. So the next reverse mortgage payment is guaranteed by the US government.
The possible down-sides of a reverse mortgage are as follows.
Reverse mortgage lenders charge origination fees, FHA MIP (mortgage insurance plans) and other closing costs also. Also some unscrupulous reverse mortgage lenders tend to pressure seniors into taking up a reverse mortgage to make more investments from the money which is not in their own interests.
It should also be noted that, the senior home owner borrowers are still responsible to keep the home or property properly maintained and they still need to pay their homeowners insurance and property tax on their own.
In the end, after all the pros and cons, the upsides to reverse mortgage loans far outweigh the downsides
