Senior citizens who may be looking to refinance their home loan often turn to a reverse mortgage loan in order to obtain money they may need later in life for a variety of expenses. A reverse mortgage loan uses a home’s equity to pay the homeowner, but unlike a regular home equity loan, a homeowner doesn’t have to repay this loan as long as they live in their home and pay their property taxes.
It’s important to remember that a reverse mortgage loan is a form of debt that will have to be repaid, but usually this money is recouped by the lender after a homeowner passes away and their estate is settled. Any senior citizen homeowner who might be considering a reverse mortgage needs to factor this into their consideration.
There can be dangers to a reverse mortgage loan as a homeowner may have to move or may be unable to pay their property taxes, in which case, they would owe money on this reverse mortgage loan. Another problem many people cite in reverse mortgage loans is that the amount is constantly drawing interest, rather than being paid down as with any other type of loan.
Reverse mortgages can be beneficial, but any homeowner who may want to leave their home to their heirs or may worry about this financial obligation eating into their estate after they pass away needs to consider that these will be very real factors when it comes time to repay the reverse mortgage.
There can be many benefits from a reverse mortgage, again, like having money later in life for various expenses borrowed against a homeowner’s equity, but any homeowner who owns their house outright might want to consider the repercussions of taking out a loan against a home that has already paid off. It will come down to a homeowner’s personal decision as to what they do, but weighing the pros and cons of a reverse mortgage is advisable before making steps towards obtaining this type of loan.