What Are the Reverse Mortgage Pros and Cons

By David Prulhiere

The Reverse Mortgage Cons:

1. Mortgage Insurance (MI) - Regardless of how much equity you have in your home, if you do an FHA loan, you are going to have mortgage insurance. When you have a reverse mortgage, the mortgage insurance covers you in the unlikely event that your loan balance exceeds the value of your home. The only time this really can happen is when property values decline drastically. Don’t forget though, even if you have no equity left, you will never be forced to leave your home. Thanks to mortgage insurance, you will never have to pay back more than your home can sell for, and you don’t have to sell until you want to.

2. Compound Interest - Everyone likes to earn it, no one likes to pay it. Simply defined, it is interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. If you’ve ever had a savings account or investment that you rolled the earnings back into, you have likely earned it. Since you are not making payments on your loan, compound interest will add up.

3. Using Your Children Inheritance - Say what? Who does the money belong to? If you need the money to make your retirement better, why shouldn’t you spend it? Use what you need and then pass on the rest to your heirs. Don’t blow the money (unless you want to), but use some of it if you need to. It is your money.

The Reverse Mortgage Pros:

1. Maintaining Your Independence - Is there anything more embarrassing than needing to ask your children for financial help? Would you like to need to move in with your kids because you can’t afford the bare necessities? Using a reverse mortgage you can keep your independence and maintain your dignity.

2. The Ability to Keep Your Home - Not having to move potentially decades of collected items and memories might be the best reason to do one. Just the thought of moving makes most people cringe. By taking advantage of a reverse mortgage, you can afford to keep the home you love while affording the retirement you deserve.

3. Affordable Living - So many seniors are broke and live in an impoverished state. Most aren’t even aware anymore because they have been living that way for so long. You can use the equity in your home and create a lifetime income stream by taking a reverse mortgage on your home.

4. No More Mortgage Payments - A reverse mortgage requires no monthly payments, and you won’t need to pay back the loan as long as you live in the home as your primary residence. That extra “income” can be pretty useful in tough times.

Did you notice that the fees weren’t mentioned in the “cons” section? That is because fees are no longer a reason to not do a loan. There are new programs available that cut the fees 50% or more. Usually the origination fee can be totally waived and you could get a large credit towards your mortgage insurance.

I have a confession to make. I am a reverse mortgage loan officer, but I truly believe that a reverse mortgage is the best tool out there to help a senior. While I agree they are not for everyone, there are a lot of folks that could benefit from one. It makes me cringe to hear someone say that a reverse mortgage is bad. They are neither bad nor good. It just depends on your need and how you use them.

Now you get to make the decision. Is a reverse mortgage a tool that will help you or someone you know? If you would like more information before making a decision, visit our website where we have more articles and blogs for you to read.

David Prulhiere is the owner of Redwood Financial Services and he specializes in reverse mortgages. If you would like to read more about reverse mortgage pros and cons or see other articles and blogs visit us at http://www.redwoodreversemortgage.com.

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