Senior citizen homeowners who have a large amount of equity in their home or own their home outright may have the option of using a reverse mortgage to gain access to funds for expenses that may arise later in life. Homeowners who qualify for a reverse mortgage may find that this particular type of home loan can be beneficial and offer funding needed for costs that range from medical expenses to home repairs, but is a reverse mortgage for everyone?
Over the past months, homeowners have used a reverse mortgage to gain money from their home’s equity. Homeowners can borrow money from a reverse mortgage and, in this case, they are not required to make repayments as long as they live in their home and pay their property taxes. While many homeowners who own their home use a reverse mortgage, there are those homeowners who are still paying on their home who have used a reverse mortgage to their benefit as well.
Homeowners that owe money on their home loan and qualify for a reverse mortgage have used this type of home loan to erase their monthly mortgage payment. While it needs to be understood that a reverse mortgage is still debt that will eventually be repaid, homeowners who have more equity in their home than they owe own their mortgage have, in some cases, used the funds from a reverse mortgage to pay off their home loan, thus erasing their monthly mortgage payment.
Yet, many believe a reverse mortgage is a bad idea for homeowners, especially since this type of home loan is creating debt on a home that was either close to being or completely paid off. Also, since there is no requirement to make repayments on a reverse mortgage, interest and the principal amount doesn’t get paid down, which many financial advisers believe puts homeowners in a bad situation.
However, most homeowners who use a reverse mortgage can safely use the money they gain and avoid financial troubles as well. While, again, homeowners must stay in their home and pay their property taxes to avoid having to repay the reverse mortgage, reverse mortgages are usually repaid after a homeowner passes away and their estate is settled.
While this situation may not be a problem for some homeowners, it can be problematic for those who want to leave their home to their heirs. After a homeowner passes, and the reverse mortgage is due, heirs are usually given a fair amount of time to sell the home, which typically leaves funds for the homeowner’s heirs, but if a homeowner wishes to pass their home to relatives then a reverse mortgage may be a bad idea.
Essentially, homeowners who have used a reverse mortgage to their benefit in the past have been in a situation where there were no plans to vacate or sale their home and the homeowner didn’t want or need to leave their home to their heirs. Since a reverse mortgage can be beneficial or quite costly, senior homeowners are advised to look at their situation, talk over reverse mortgage options with various lenders, and make sure they are willing and able to handle the requirements that come with a reverse mortgage loan.