The Pros And Cons Of Reverse Mortgages - A Quick Guide
November 28 2018 Posted by Colleen Macdonnell, AMP
No matter how carefully you plan, life can put a dent in your retirement funds. A life-altering accident or illness can turn your life upside down. Dipping into your retirement to meet uncovered expenses can leave you concerned about your future. Some seniors have had to sell their homes in order to pay unexpected bills and expenses. A reverse mortgage may be able to help you stay in your home and pay off the bills.
What Is A Reverse Mortgage?
A reverse mortgage is a loan borrowed against the equity you have in your home. It may be distributed in a lump sum, a monthly payment, or in a line of credit.
Upside Of A Reverse Mortgage
There is no requirement to make any payments on a reverse mortgage loan as long as you remain living in the home. You might want to consider a reverse mortgage if:
• You would like to pay off your mortgage balance
• You have difficulty paying monthly bills on time
• You want to stay in your home the rest of your life
• You could use extra monthly income
• You are at least 62 years of age
• You have at least 52 equity in your home.
Downside Of A Reverse Mortgage
There are things that must be considered before applying for a reverse mortgage.
1. It is a loan that accumulates interest, which causes the amount due to grow over time.
2. Property taxes and insurance must be kept current to avoid foreclosure proceedings.
3. You won't be able to borrow the full amount of your home equity as the loan amount is based on appraised value of your home, the balance owed, current rate of interest, and your age.
A reverse mortgage can be very beneficial for many seniors, and put money in their bank accounts. Be sure to consider the pros and cons before making the decision to apply for this type of loan.