A reverse mortgage loan is usually an option only reserved for senior citizen homeowners and there are mixed feelings about this type of loan as it can come with both pros and cons. Senior citizen homeowners need to understand that a reverse mortgage is a form of debt that must be paid back, but a homeowner doesn’t have to pay back this loan as long as they live in their home and pay their property taxes.
This type of loan has been used by many homeowners in order to get rid of their current home loan payment and have a little extra money for expenses later in life. A reverse mortgage must first go towards any amount remaining on a home loan, so if a homeowner has more equity in their home than they owe, a reverse mortgage can pay off the remaining balance on their mortgage and leave them, depending on the situation, with money left over.
It’s important to keep in mind that a reverse mortgage doesn’t require payments like a traditional loan. This means that reverse mortgage debt will simply increase due to interest over time and can become quite costly down the road. However, the money for a reverse mortgage is usually recouped after the homeowner passes away and their estate is settled.
It’s at this point that a homeowner must decide if they are willing to allow this to happen to their estate and if they want to risk not being able to leave as much money or property to their heirs. While, again, a reverse mortgage can be helpful, homeowners really need to consider the upside and downside to this type of loan before proceeding.