The Pros and Cons of Reverse Mortgages

The Pros and Cons of Reverse Mortgages

If you are a senior citizen with no means of support apart from the little social security retirement payment that you get at the end of the month, you might want to take a closer look at reverse mortgages. As much as you have already paid for the property, you will still need money to pay for taxes and other day-to-day expenses, not to mention have some fund somewhere for an emergency, such as medical care emergency which is not under Medicare. In reverse mortgage, your lender will be paying you some money each month as you have been paying all along to pay off the mortgage loan.

The biggest advantage here is that you wouldn’t have to rely on your children and well wishers to foot your monthly bills. You can thus be able to take care of such things as home repairs, perhaps some pending school fees or an emergency medical bill, perhaps you even need some extra cash to tour the world and holiday make as you enjoy your sunset years.

Some notable pros of reverse mortgages include:

1.      You will never owe your lender more than the total value of the property

2.      It will have no effect on your Medicare or Social Security

3.      You will live within the premises for as long as you will be alive

4.      The income you get from the reverse mortgage is free of taxation

5.      Most reverse mortgages will not need a source of income or a good credit score to qualify

6.      You get a flexible payment option such as a fixed monthly income, a lump sum, a line of credit, or a combination of several of these options

Reverse mortgages cons

1.      Your eligibility for Medicaid may have a negative impact if you withdraw more than you spend in a typical month

2.      High interest and fees – the interest rate will significantly increase the total amount owed each month. Further, reverse mortgages attract very high closing and origination fees, which differ from one lender to another, reason enough to request for more than a single quote

3.      While the interest that accompanies the reverse mortgage is not taxable, when you pay off the loan, your income might be eligible for taxation

4.      In order to qualify for a reverse mortgage, you will have to be at least 62 years of age

5.      You will remain responsible for all expenses that accompany the property including such things as insurance, property taxes, and all other related expenses and costs

As is therefore evidence, reverse mortgages are good and bad at the same time. It should only be taken if you don’t have any other alternative because failure to honor your end of the deal might lead to foreclosure; what worse way to end your sunset years than being homeless due to poor financial choices? Be informed in order to make a wise decision that will ensure you have the most memorable retirement time as you walk down memory lane a step at a time.