If you are considering buying a home, a reverse mortgage may sound like an attractive option. It will help with your finances without you having to pay taxes. Getting a reverse mortgage does have its pros and cons. However, this move may be worth a deeper look to some of you irrespective of this factor.
What is a Reverse Mortgage?
If buying a home and considering a reverse mortgage, you should always learn more about your options. Going into it blind, will not be a good move. Therefore, you need to understand what a reverse mortgage is. A reverse mortgage is a loan; seniors over the age of 62 are eligible for. This enables them to turn part of the equity in their home into cash. This type of mortgage was brought about to assist retirees who have limited income. With this mortgage, they are able to cover basic monthly expenses and also pay for any health care. This mortgage can be used in any way necessary as there are no set restrictions as to how the proceeds can be utilized. The difference between a reverse mortgage and a normal mortgage is that the lender makes payments to the borrower. You do not have to pay back your loan until your home is sold, although you do have to pay property taxes promptly and any other fees necessary.
What are the Drawbacks to a Reverse Mortgage?
Although all this may sound good, you need to understand that there are a few drawbacks to reverse mortgages. Firstly, there are costs involved. Yes, all mortgages have costs, but in reverse mortgages, the costs can be extremely high. Sometimes, these costs can be as high as $30,000. (As a note – this mortgage cost can be included your mortgage and not payable out of pocket at the time of the loan.) Another drawback is the amount payable should you vacate your home or move out of your home for a long period. This mortgage option will also affect your estate as it will decrease the equity in your home and leave your heirs with less money.
Every loan option has its pros and cons. It is up to you to understand these loans and think about whether it suits you. Taking out loans is no small thing. So, make sure you do your homework and know what you are getting into, and always consider other loan options before proceeding.