What Are the Advantages and Disadvantages of a Reverse Mortgage?

By Rahn Naro

As with anything in life there are pros and cons, advantages and disadvantages, two sides to the same coin, which is certainly true of the reverse mortgage. There comes a time as we get older, that we realize there is a sizable amount of equity in our home, and we may wonder if that money can be utilized for other purposes? There are multiple alternative available to the homeowner.

One being selling your home and moving into something smaller and less expensive. However, many do not like the idea of selling their homes and undergoing a stressful move.

Second being a second . However, this incurs monthly payments and the fear of late fees, potentially causing worry and stress.

And then there is the reverse mortgage that allows a person to continue living in their home, with no fear of monthly payments, while still utilizing the equity in their home for any variety of needs or desires.

However, if you do make a choice for a reverse mortgage, there are certain things you should be aware of and consider.

A reverse mortgage was created and structured specifically for seniors, (seniors defined as anyone 62 years or older), allowing them the ease and convenience of utilizing the equity that has most likely greatly increased over the years, (due to paying off the mortgage and increasing home values). A reverse mortgage allows you to utilize, the equity in your home. However, instead of making payments each month, payments are instead made to you. If this seems confusing, and you’re wondering what are your options, this would be a perfect time to seek more information, and explore the possibilities.

If you make the decision to opt for a reverse mortgage, you are not necessarily locked into a long term loan, you do have the option of paying off that loan at any point in time. However, you have no obligation to do so. Once a reverse mortgage is in place, and as long as your home remains your primary residence, you continue to receive monthly payments, (some opt for a lump sum), while remaining safe and secure in your home.

NOTE: it is required that those who have a reverse mortgage, continue to pay their homeowners insurance, and property taxes.

For example, let’s consider two people in their mid-70s, who are considering the advantages and disadvantages of a reverse mortgage. The home in question was purchased in the early days of their marriage for only $14,000, and over the years property values have risen dramatically and their small modest home is now worth an estimated $160,000. It is natural for a person to wonder if they can utilize that increase in value (or equity) for other priorities in life. This is an excellent question, and is the primary reason a reverse mortgage was created.

There are multiple thousands of seniors across America, who have worked hard, made their monthly payments and now live in a home which is either paid off, or very close to that goal. These are the very people, who can profit greatly from looking in-depth into what a reverse mortgage can offer them.

The money received from a reverse mortgage is tax free and does not need to be repaid until the borrower either passes from this life, or decides to sell their home. At such a time as that, the reverse mortgage must be paid in full including any interest and fees.

However, when the owner passes away, the estate has multiple choices available, as well as a substantial period of time (up to 1 year in many cases) to decide. The heirs can either sell the home, refinance, or simply walk away without incurring any obligation or debt.

While a reverse mortgage may not be the best choice for everyone, it can certainly help thousands and should certainly be considered by anyone 62 or over.

A reverse mortgage, available to those 62 years and older, allows those who have accumulated substantial equity in their homes to utilize the equity in their homes. This money can be used without incurring monthly payments, and as long this remains your primary residence, you can rest in the knowledge that you will never be forced to move, sell your home, or be faced with late charges. The Senior Advisory Network, was created to help seniors better understand their options in what has become a fast paced, high tech world.

Photo by David Ohmer

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