A reverse mortgage is a loan that allows seniors and retirees to get money to pay the expenses that they have. Unlike the common types of mortgages, people are not required to pay them until they move out of the home. This also means that they are not required to pay mortgage bill every month. Reverse mortgages also allow people to convert part of their home equity directly into cash.
In order to be eligible, the home owner must be 62 years old or older. The home must be a single family home, or a home with one to four units, with at least one occupied by the home owner. There are currently many debates about whether reverse mortgages are beneficial or not. The following below shows the pros and cons and of reverse mortgages. Knowing the advantages and disadvantages of reverse mortgages will allow home owners to make a better choice when it comes to choosing them.
Pros of Reverse Mortgages
There are many advantages reverse mortgages that can benefit home owners. For example, the home owner does not have to make a monthly payment. This means that the homeowner may never have to worry about where to get the money pay the mortgage. This is very beneficial for people who have hard times to make ends meet. Home owners can also use the money for whatever they want, such as paying off expensive medical bills, buying food, or going in vacations.
As long as the homeowner continues to live in the property, he can receive additional income from the reverse mortgage. Even if the loan amounts surpass the value of the house, the home owner can still receive more money each month.
Cons of Reverse Mortgages
While reverse mortgages can indeed be helpful for seniors, there are some disadvantages they should be aware of. Reverse mortgages are very expensive loans, and applicants are required to pay costly origination fee. The closing costs are also expensive for reverse mortgages.
Reverse mortgages the eligibility of seniors for programs such as Medicaid. When all of the money from reverse loans are placed in a bank account at once, seniors can be come ineligible for these programs. If seniors receive more money than they are going to spend, they may become ineligible for Medicaid.