Many senior citizen homeowners often turn to a reverse mortgage loan in order to obtain money later in life for a variety of expenses. A reverse mortgage loan is not often used as it can only be obtained by homeowners of a certain age. There are upsides and downsides to this type of home loan which a homeowner must consider before proceeding.
It must be first known that a reverse mortgage loan is a form of debt that will eventually have to be paid back, even though a homeowner is not required to repay this mortgage as long as they are living in their home and paying the property taxes. Usually a reverse mortgage loan will be repaid from the estate of the homeowner after they pass away.
Also, since a reverse mortgage loan does not require any payments it will only increase in value due to interest. While the amount of the loan may vary depending on the amount of money borrowed, interest rate, and the length of the loan, this is another factor homeowners need to consider.
Some homeowners feel that their heirs may not need their home or the entirety of the estate which they were going to leave, so a reverse mortgage loan is no problem for them. However, this is going to be a personal decision for anyone who is considering a reverse mortgage loan.
It’s also important to keep in mind that any amount that is still owed on a home loan will have to first be repaid from the funds received from a reverse mortgage. It’s for this reason that homeowners who owe more on their home than they have equity built may not benefit from a reverse mortgage.
Many advisors caution homeowners against acquiring more debt on a home that is either paid off or close to payed off and feel that a reverse mortgage is not something that should be used by senior citizen homeowners. However, it comes down to the homeowner weighing the pros and cons of this type of home loan and seeing how it will affect their life.