Many senior citizen homeowners often use a reverse mortgage as a way to obtain money, later in life, from the equity they have built in their home. There can be many benefits to a reverse mortgage but there are also drawbacks as well. Both the pros and cons need to be weighed when looking at a reverse mortgage and any homeowner who is considering this type of loan should not rush to make a decision.
A reverse mortgage is essentially borrowing money against the equity in your home, but for senior citizens who qualify for a reverse mortgage they never have to pay back this loan as long as they are living in their home. Usually, the money is recouped for a reverse mortgage after a homeowner passes away and their estate is settled.
However, it’s very important to remember that a reverse mortgage loan is a form of debt that must be paid back, so homeowners need to factor this in when they are making a decision as to if a reverse mortgage is right for them. The situation may arise where a homeowner has to move from or sell their home and in this case they would have to begin repaying their reverse mortgage.
While many homeowners will use a reverse mortgage for expenses that may arise later in life or as a way to simply have money for a variety of reasons that range from renovations to their home to getting rid of their home loan payment, money from a reverse mortgage must first go to pay off the remaining mortgage balance on a home. In this case a homeowner who owes more on their home than the equity they have built up will not benefit from a reverse mortgage.
Senior citizen homeowners need to figure out if they’re willing to take the risks that come with a reverse mortgage as this type of debt never gets paid down, but rather increases thanks to interest and no required payments. Anyone who wants to leave a sizable amount of money to their heirs or who wants to leave their home to family members will probably want to avoid a reverse mortgage.
Yet, the reverse mortgage is going to be something that will be a personal decision on the part of the homeowner. Again, there are benefits but there are also drawbacks and homeowners need to sit down and analyze possible scenarios and consequences for obtaining a reverse mortgage loan before they proceed.