Advantages And Disadvantages Of A Reverse Mortgage
With any new venture, there is the good and the bad. Let us look at the advantages and disadvantages of a reverse mortgage. One of the biggest advantages is no re-payments while you live in your home. This is a big draw for seniors looking for a loan. Many seniors opt to pay off their current loans and house payments. The second advantage is that you can live in your home as long as you wish. The amount you owe can never be more than the housing worth. There are also different withdrawal options.
You can choose to get your money in a lump sum, monthly installments, line of credit or a combination of all three. The decision is yours. The loan also has the benefit of tax-free proceeds. In fact, the IRS does not consider loan advances to be income. All those proceeds can go right into your pocket. Of course this is all determinant on the right lender too. Now that we have discussed the advantages, let us discuss the disadvantages. There are differences that people do not realize about reverse mortgages and conventional loans.
One disadvantage is the cost of a reverse mortgage, which can be very expensive. This is because of the rising-debt nature of the loans. A typical reverse mortgage may be $300 monthly with a yearly interest rate of 12% compounded monthly. Over ten years the homeowner could get $36,000 but owe $70,000! Another disadvantage is the complex contracts. The confusion from clients could hide hidden costs. It can become infuriating because the costs have no correlation to the amount borrowed. The third and most important disadvantage is the affect this could have on old age pensions, Medicaid and social security.
The problem is that many seniors are not aware of the advantages and disadvantages of a reverse mortgage and find out later. They realize that instead of getting more money they are losing money. There is the issue of a senior’s assets and estate. A reverse mortgage can actually reduce the value of these holdings. Down the road, it will affect any thing they may want to leave as an inheritance for their children and grandchildren. The only way to avoid these pitfalls is to choose your lender carefully. Then study the documents and do what is best for you.
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Mortgage Rates Reverse Course on Positive Housing Data - MarketWatch (press release)
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Chris Vigil: For some, a reverse mortgage makes good sense They say youth is wasted on the young. Simply because as we get older we become wiser in our lives especially with money decisions... | ||
NATION: Reverse mortgages can help senior citizens, but may not be for everyone With fixed incomes and increased living expenses, many senior citizens are turning to reverse mortgages as a way to receive extra cash... | ||
Simply Money: Beware reverse mortgages - Cincinnati.com
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Internet Marketing Service Launched for California Based Financial Services . - San Francisco Chronicle (press release)
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Reverse Mortgages Return Lenders are quietly reviving a loan for seniors that helps them convert home equity into cash... | ||
Reverse mortgage vs. HELOC for extra cash? Dear Dr. Don, We own a condo in Florida and a home in Pittsburgh. I just retired at 70 years old, and now money is very tight. Can I qualify for a reverse mortgage on one of my homes? As you know, selling real estate in this market is a problem... | ||
Q&A: Walking away from reverse mortgage may not be best - Kansas City Star
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Reverse Mortgage Applications See 19% December Decline - Reverse Mortgage Daily
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Reverse Mortgage Versus HELOC for Extra Cash? A reverse mortgage needs to be on your primary residence, and you can't move out of that residence without triggering the payoff of the reverse mortgage... | ||
Boomers' $3 trillion nest egg - CBS News
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Urban Seeks Feeback on Proposed Reverse Mortgage Financial Assessment Guidelines - Reverse Mortgage Daily
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MetLife Looking to Update Reverse Mortgage Financial Assessment - Annuity News Journal
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HomEquity Bank's reverse mortgage originations up 42% in Q4 2011 HomEquity Bank's reverse mortgage originations up 42% in Q4 2011.. | ||
Mortgage Rates Reverse Course on Positive Housing Data McLEAN, Va., Jan. 26, 2012 /PRNewswire/ -- Freddie Mac (OTC: FMCC.OB - News) today released the results of its Primary Mortgage Market Survey (PMMS ), showing average mortgage rates climbing as the housing market ... | ||
Who Should Do a Reverse Mortgage? Reverse mortgages allow homeowners of a certain age to draw down on their home's equity in exchange for cash--but it's not always the best financial decision for everyone... | ||
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