Reverse Home Mortgages Pros and Cons

2009-02-14T11:52:00.000-08:00

The reverse home mortgage sounds like a good solution to the senior homeowners to enjoy their retirement without money problem worry. But are there any negative consequences on the reverse mortgage? Whether or not a reverse mortgage is good for you depends on your needs and priorities. Please consider the advantages and disadvantages of reverse home mortgages carefully. Here are the significant pros and cons.

The disadvantages of the reverse mortgage are:-

1) The reverse mortgage is a financial business one. The lender would have their benefits from the borrowers. There are a lot of fee charged like the insurance premium, annual fee, interest rates, etc (see Reverse Mortgage Fee) which will be include to the amount owed, therefore, reduce the ultimate amount of equity in the home.

2) The balance owed goes up with each money paid to the borrowers. Interest is accrued on the balance owed and added to the amount you owe each payment time.

3) Reverse mortgages can use up all or some of the equity in your home, leaving fewer assets for you and your heirs.

4) There is a risk to lose their home if they run out of equity and have no other income sources.

5) Interest on reverse mortgages is not deductible on income tax returns until the loan is paid off in part or whole.

6) Because you retain title to your home, you remain responsible for property taxes, insurance, utilities, fuel, maintenance, and other expenses. So you risk the loan becoming due and payable if those expenses have not paid.

The advantages of the reverse mortgage are:-

1) The homeowner can access home equity for the rest of their life.

2) The borrowers cannot lose their home to foreclosure because there are no monthly loan repayments as long as they live there.

3) The borrowers cannot outlive the mortgage and don’t have to move out. Because they do not sale the house to the lender. It just a mortgage which is due when the homeowners permanently move out the home or sell it or pass away. The reverse mortgages can provide a guaranteed stream of cash for their lifetime.

4) The reverse mortgage is a non-recourse loan. The balance of the Reverse Mortgage can never exceed the value of the home.

5) The banks do not earn all future equity! The reverse mortgage is paid out of the proceeds of the home sale. The borrower or his/her heirs receive any remaining equity according to FHA.

6) The borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.

What Is A Reverse Home Mortgages?

2009-02-14T02:59:00.000-08:00

When we was told that there was a mortgage which we didn’t have to pay it back until we had left our houses permanently, we would be amazing and wondering what is a reverse home mortgage?

A reverse mortgage is a loan used by the elderly American homeowners aged 62 and over to convert their home equity into cash without having to make a mortgage payment for as long as they live in the house. The senior citizens can get the money they need to fully enjoy their retirement years without losing their home to foreclosure or selling the house to the lender. Instead of paying the mortgage holder a monthly payment as a result to decrease the outstanding balance owed to the mortgage holder, a reverse mortgage is in the opposite direction. The balance owed increases each month when the mortgage holder gives a money paid monthly to the homeowner.

The loan amount will be based on the age of the youngest owner and the value of the home equity, as well as a couple and other factors. The older homeowner is, the less equity is required. The property types to be qualified are 1 to 4 family homes, most condos, manufactured houses as long as they meet all the FHA requirements. They are excluding mobile homes, and probably never will property.

The reverse mortgage is due when the homeowners permanently move out the home or sell it and will be called in the case of the death of the last borrower, non-payment of taxes or home owner's insurance, or if the homeowners allow the place deteriorate. At that time, the reverse mortgage is paid out of the proceeds of the home sale.

When the home is sold by the borrowers, the mortgage is paid at closing. If the circumstances are such that the loan amount exceeds the market value of the home, the bank absorbs the lost. This is called a non-recourse loan. If the balance owed is paid, the borrower or the heirs receive any remaining equity.

Reverse Home Mortgage Loan

Reverse Home Mortgages Pros and Cons

What Is A Reverse Home Mortgages?