Certain financial strains and economic difficulties that have caused trouble for many senior homeowners and, as a result, more seniors have turned to a reverse mortgage loan. A reverse mortgage is a particular type of loan which a homeowner can use to gain capital from equity in their home but they do not have to make repayments on this debt as long as they live in their home and keep their property taxes current.
While a reverse mortgage is debt that must eventually be repaid, homeowners who use this type of home loan often are not required to repay this mortgage obligation but rather the funds are recouped from a homeowner’s estate after they pass away. There are mixed feelings on reverse mortgages though as many advisers believe it can be a bad decision on the part of a homeowner.
Any funds gained from a reverse mortgage must first go to pay off any remaining balance a homeowner has on their mortgage. While this has helped many erase their monthly mortgage obligation, oftentimes, homeowners who use a reverse mortgage are either close to or have paid off their home loan. Financial advisors often believe that adding debt to a home that has been paid off is simply a bad financial decision.
Yet, senior homeowners who use a reverse mortgage have been able to gain access to capital for various expenses that may arise later in life, like medical or insurance costs, but these funds can also be used for home repairs or other personal ventures. Typically, after a homeowner passes away, their heirs are given time to sell their home and money from these funds goes to repay the reverse mortgage.
One downside to a reverse mortgage is that it may leave will a homeowner’s heirs with no house to inherit. Yet, this is a personal factor that must be considered by a homeowner who is looking into a reverse mortgage. There are those who point to the fact that a reverse mortgage doesn’t exceed the value of the home, so a homeowner’s estate can’t be erased by this type of loan in most cases.
However, homeowners have been using a reverse mortgage as of late to help them through these tough financial time, but this type of mortgage debt, although it doesn’t require repayments, is still something that shouldn’t be entered into lightly.