ORIGINALLY PUBLISHED by DLC Marketing Team Aug. 24, 2021
PROS & CONS of a reverse mortgage
After all of that, you may still be wondering whether or not a reverse mortgage is the best idea. Like anything else in life, it comes with its own set of pros and cons involved. This makes it worth considering and looking further into.
Let’s start with the good news first.
This type of mortgage can be a very powerful source of income for older individuals. It can be for those who need to increase their retirement income or take on a big household project. Since the largest asset that most retirees have is their home – and it is likely paid off – this allows for an increase in income without increasing monthly payments. It is a great way for retirees to stay in their homes.
Not only that, but it can be highly beneficial because it requires no payment. That is until ownership of the home changes hand, the home is vacated or condemned, or the borrower passes away. It is the quickest and easiest path to substantially more income for a retired person who may not otherwise have that kind of access to additional funds.
Generally speaking, the interest rates tend to be much higher than most other types of mortgages out there. It is also worth considering that the equity in your home could go down. Combined with interest on your loan adding up, it could create quite the gap.
While you won’t need to repay the loan until you pass or sell the home, paying the loan and interest in full will fall on the shoulders of your estate. Not only that, but it must be repaid within a specific period of time.
The general costs associated with this type of mortgage also tend to be much higher. While there is certainly greater flexibility in how you get and spend your money, it comes at a cost, literally.
Ultimately, it is up to you to determine if the benefits offset the higher cost and burden of repayment that falls on your estate. Getting the money from your loan, as well as what you can spend it on, is perhaps one of the most flexible mortgage options out there. This is especially true for seniors.
It also provides much-needed income for those retirees who may not have adequate funds for retirement. This shortfall can happen for a lot of reasons, and it is common for retirees to exceed their expected retirement life.
Weighing the pros and cons is essential regardless of the loan type. A reverse mortgage has all the potential to be beneficial to seniors in need of funds and provides greater flexibility for acquiring and spending that money.