Disadvantages Of Reverse Mortgages-Some Drawbacks To Getting A Reverse Mortgage
by William Perry
While reverse mortgages have its advantages to senior citizens, it is essential to know the disadvantages of reverse mortgages so you'd know whether it would be best for your particular needs.
Knowing both the advantages and disadvantages of reverse mortgages would make you more comfortable when taking a step towards getting this type of mortgage.
Reverse mortgages have been designed to help "property-rich-cash-poor" senior citizens to release the equity of their homes and turn it into a source of income to meet their financial needs. Reverse mortgages are tax-free and requires no minimum income or credit history.
The homeowner can stay in their home as long as they want or until they die, and they can use the proceeds of the loan for any purposes. They also have the choice of receiving the loaned amount as a lump sum or in installments.
However, because you are not required to make monthly repayments, the interest adds up and grows significantly over time. Reverse mortgages are rising-debt loans, which means they are costlier than traditional forward mortgages.
One of the conditions of reverse mortgages is that you must payoff any outstanding balance on your home with the proceeds of the reverse mortgage. This is would be a disadvantage on your part especially if you still owe your past mortgage company a substantial lot.
One of the bigger disadvantages of reverse mortgages is that you can use up all or most of the equity of your home. If you plan to bequeath your home to your descendants, they have to take the responsibility of repaying your loan.
Though reverse mortgaged homes are often sold to repay the loan, this is a major aspect you have to consider especially if you are looking towards leaving some assets to your heirs. So while this type of loan can help you meet your financial obligations, understanding also the disadvantages of reverse mortgages is vital so you decide what is best for you.
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