Reverse Mortgages: Their Advantages And Disadvantages
If you are thinking of reverse mortgages, it is not a good idea to plunge right ahead and submit your application right away. Learning the advantages and disadvantages will help you come up with a wise decision in so far as financial loans are concerned. After all, loans will end up anyone up needing to pay all the dues – and this can be a scary thought once you are stuck with high mortgage fees and charges.
Here are the advantages of reverse mortgages.
For most people, this program is a savior because of the positive impact it brings to the quality of life of most senior citizens. First is because of flexible financial program and the limited restrictions on how they can receive and spend the loan. There is no default risk since the home is yours under certain circumstances and the lender has no right to take it away.
The total of what you will owe the bank will also not be more than what is your home's worth even though you get more from the lender. This advantage is particularly interesting especially if the value of the home depreciates or declines.
Reverse mortgages are also tax free since the proceeds are loans and not income, whether you receive it lump sum or fixed monthly cash flow. They offer flexible payment options, from options of credit line, annuity, lump sum, or combination. They ensure your home ownership and no income qualifications are set for you to avail the program.
You are protected because the federal government has set some strict regulations and safeguards to avoid the lending predators from taking advantage of the rather vulnerable senior citizens. One positive effect on the life of the applicants is the receipt of payments even if the lender defaults on your reverse mortgage loan. And of course, you can use the funds to whatever you want to spend it.
Just like in any other mortgages, along comes the disadvantages:
It is not recommended for senior citizens to take this program if they are planning to move out or to stay in their homes for a long period of time. This is because the moment you do not live in your home, your home mortgage due takes effect.
This is not good since most up front closing costs that lenders make are usually higher than other types of loans. So, in this aspect, reverse mortgages are not recommended for the people who are not keeping their home as primary residence.
Reverse mortgage can also decrease equity of the home and in effect affects the estate. It is for this reason why many do not consider reverse mortgage because they want to leave the home to the heirs. However, the heirs also have the option to keep and refinance the home, sell it if its worth becomes higher than what it is owed.
Reverse mortgages can be advantageous or disadvantageous to some people, but under the right circumstances, they can be good financial retirement option to others. With the set of those given facts, it is not about how it can benefit you or how it can deter you from living a comfortable life later but it is a matter of coming up with a wise decision.
Final say? When it comes to financial retirement plans, be sure to do lots of research about reverse mortgages before plunging right head on.
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