Many senior citizens often seek a reverse mortgage in order to obtain money for various costs later in life. A reverse mortgage is money that is paid based on a homeowner’s equity and can be quite useful for anyone who has a sizable amount of value in their home or owns their home outright.
However, many financial advisers believe that this type of home loan refinancing is a bad idea. Any money that is still owed on a home loan will be taken out of the total of the reverse mortgage funds borrowed, which can erase a monthly mortgage payment for senior homeowners. Yet, this money borrowed from a reverse mortgage does not have to be repaid so it constantly grows rather than gets paid down.
Money from a reverse mortgage is often recouped after a homeowner passes away, since again, this mortgage does not have to be repaid as long as a homeowner lives in their home and keeps their property taxes paid. It is important to remember that a reverse mortgage is a form of debt and it will eventually have to be repaid so homeowners are often cautioned to consider these facts before seeking out this type of loan.
The money owed on a reverse mortgage can often eat into a homeowner’s estate and will affect the amount of money or property that can be left to their heirs. Also, again, since this amount is never pay down reverse mortgage debt can grow to a substantial size, but this will be dependent upon the amount of money borrowed and the reverse mortgage’s interest rate.
While a reverse mortgage can be helpful for senior citizens who need money later in life, it is often advised that senior citizens take the time to consider the drawbacks of this mortgage, weigh the pros and cons, and figure out how this type of mortgage will affect them.