With a reverse mortgage, you always own your home, while you or your heirs dispose of the property just the same with a reverse mortgage as you would with any other home loan. reverse mortgage proceeds are tax free, and you can use the money for any purpose you choose. You can modernize or alter you home for comfort.
Pros of Reverse Mortgages. Allows the homeowner to stay in the home. 1 Can pay off existing mortgages on the home. No monthly mortgage payments are required, however the homeowner must live in the home as their primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to federal housing administration requirements.
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Reverse mortgages remain a popular lure for cash-strapped seniors, but what’s good in theory is often abysmal in execution. A reverse mortgage allows someone who is ‘house rich and cash poor’ to get a payment from their lender in exchange for the bank getting the equity in the house over time.
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5 Downsides of a Reverse Mortgage. The home is then used as collateral for a new mortgage loan, up to $625,500 (or the lesser of the appraised value). But, instead of making monthly payments to the lender, the lender makes monthly payments to you, drawing on your home equity. It’s a bit like purchasing an annuity using your home’s value.
CONS OF A REVERSE MORTGAGE The loan balance increases over time as interest on the loan and fees accumulate. As home equity is used, fewer assets are available to leave to your heirs. However, this can be done using other funds or by refinancing through a traditional mortgage. Fees may be higher.
Reverse Mortgage Pros and Cons Pros of Reverse Mortgages. Provides flexible disbursement options (i.e. monthly or line of credit) Homeowner stays in the home without making monthly mortgage payments*; eliminate any existing mortgage
A reverse mortgage might not be the best option for you, but there are several alternatives that might be a better fit for your finances. When a reverse mortgage isn’t the best fit, you may be able to tap into quality alternatives.
The action is a reminder of the pitfalls that reverse mortgages can have for. Let's take a look at how they work and their pros and cons.