Discover reverse mortgage pros and cons
Reverse mortgage Pros and Cons: Critics have lined up on both sides of the fence. Those who approve of the loans waive flags and think every American senior should apply. Those who appose spew the hidden dangers and caution seniors and their loved to beware excessive reverse mortgage fees. The truth is that there are positive and negatives to everything and these loans are no different.
I was recently contacted by a senior living in the Philadelphia, Pa area. Mary is retired and has been living on a fixed income for some time now. Like many seniors today, Mary is facing financial burdens that she just can not handle on social security, and medicare alone and was hoping that a revere mortgage could help.
Recently she discovered that she needs to replace a old leaky roof but she does not have the money in savings, her current income is gone before the month is out, and her children and grand children are having financial struggles of their own.
I had recently helped one of Mary’s close friends. Because Mary trusted the advice of a friend and I worked for a lender she trust, Wells Fargo, she decided to give me a call.
By the time Mary got in contact with me she had already done a fair amount of research on reverse mortgages and knew the basics. The problem was has she put it, “this all sounds to good to be true”. She wanted to know if reverse mortgages were a scam.
I assured Mary that reverse mortgages are not a scam, after all the majority of these loans are backed by the Federal Housing Authority (FHA); then I went on to explain that like anything else reverse mortgages come with their own unique set of pros and cons. Here’s what I told her.
Reverse Mortage Pros:
- Homeowner stays in the home permanently or until she/he decides to move out.
- Credit score or income is not considered to qualify.
- No payments are due as long as the homeowner lives in the home.
- Reverse mortgages offer different options to the homeowner either in the form of a credit line to be used when needed, monthly income, or a lump sum.
- Heirs will never owe more than what the home is worth.
- Heirs inherit the home and the remainder of the equity after the reverse mortgage is paid off.
- Proceeds are not taxable.
- Interest rates are lower than traditional home equity loans.
- Counseling is available and mandatory.
Reverse Mortgage Cons:
- If you want to leave the home free and clear to your heirs, this is not the program for you.
- Closing costs on the loan may be higher than a conventional loan because of insurance costs and origination fee.
- Medicaid can be affected if the funds are withdrawn but are not spent in one month.
- One third of homeowners are not eligible because they do not have enough equity in their home
If you would like to have a lender contact you complete the free online reverse mortgage quote form.
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