A reverse mortgage can be an incredibly valuable retirement plan that increases retirees income streams by using their largest assets: their home. But as is the case with most things there are both pros and cons to obtaining a reverse mortgage.
A reverse mortgage allows homeowners to borrow against their home’s equity, as well as maintain ownership of their home. And, arguably the best part about a reverse mortgage is that there are zero payments involved, unlike a conventional mortgage, however, there are also a few downsides to a reverse mortgage that you should understood.
Here are Becky Smith Home Loans pros and cons of a reverse mortgage:
What Are The Pros Of A Reverse Mortgage?
A reverse mortgage can be a fantastic tool of funding for individuals who need to greaten their income and be comfortable in their retirement. The largest asset most retirees obtain is their home. In many situations, a retiree’s home is paid off, and a reverse mortgage increases income without changing monthly payments. It also allows a retiree to stay in his or her home.
If you’re over the age of 62 and considering a reverse mortgage, then the amount you may be eligible for is based off of many factors. This includes the value of your home, your age, and interest rates. You will be eligible for additional money based on the older you are, the more your home is worth, and what the lower current interest rates are. You can calculate your reverse mortgage here.
What Are The Cons Of Reverse Mortgages?
Although there are significant benefits to having a reverse mortgage, the cost can sometimes outweigh the benefits. All mortgages have prices to pay, but reverse mortgage fees, which usually includes the interest rates, loan organization fees, mortgage insurance fees, appraisal fees, title insurance fees, and other closing costs, are very high when compared with a traditional mortgage. Some high costs can be between $30,000 to $40,000. This cost is paid out by loan, though.
In addition, it’s important to be aware that you must pay back your loan even if you permanently move out of your home. This may not seem like a problem at first, but if you ever need full-time care in the future, the loan would become due if you left your home for at least a year.
The last downside to a reverse mortgage is that it affects your estate. The reverse mortgage will usually decrease your home’s equity, which may leave your heirs with less money.
The Benefits Outweigh the Negatives
Despite the downsides to having a reverse mortgage, we believe that the positives ultimately outweigh the negatives. At Becky Smith Home Loans, we believe that a reverse mortgage is a powerful source of funding for individuals.
If you have any other questions on the pros and cons of reverse mortgages, please contact Becky Smith at 780-737-3000.