Are you currently in a financial situation where you are considering a reverse mortgage, but you are not sure if it is right for you? It helps to know some of the advantages and disadvantages of using a reverse mortgage.
Reverse Mortgage Advantages
The biggest advantage of a reverse mortgage is that you won't have to make a mortgage payment. This makes it quite different than simply refinancing, which still requires you to make mortgage payments with the money that you took out of your home's equity as cash. This can give you peace of mind that you have the money you need for retirement, and don't have to factor in monthly mortgage payments as part of it.
The other problem with a simple refinance option is that your home may plummet in value, making it difficult to sell your home and use the proceeds to pay off the mortgage. With a reverse mortgage, know that the lender can never cut off your line of credit if your home value decreases. That line of credit is yours to use, and the credit line will actually grow over time. What this means is that if you have months where you don't need to withdraw from your line of credit, your credit line will grow and you'll actually have more money available to you.
Reverse Mortgage Disadvantages
The main thing that people do not like about reverse mortgages is that they are not going to be able to leave their home to their children someday with their home free of any loans. The home will have a lien on it, with the sale of the home being intended to pay off the lien. Some people expect to leave their home to their children as an inheritance, and this would not be possible with a reverse mortgage.
A reverse mortgage also has closing costs associated with it, and those closing costs are much more than if you were to get a standard home refinanced. This means that it will simply cost you more money than you imagined to get the reverse mortgage in the first place, so make sure to compare different lenders to ensure you're getting the best deal possible.
Not sure if a reverse mortgage is right for you? Reach out to a lender in your area that works with reverse mortgages since they can look at your specific situation with your home.Share
11 October 2021
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