Reverse mortgages are becoming a big topic for senior homeowners as there are some benefits that can be gained through the use of this particular type of home loan for seniors who may be in need of financial resources to meet costs which have arisen later in life. However, there are risks of using home equity for personal financial assistance, be it for investing, medical costs, or for renovations to a home, so homeowners are being prompted to further research this particular home loan opportunity that may be available to those in financial need.
Obviously, many homeowners are aware of the benefits of a reverse mortgage, which include access to capital for senior homeowners and no requirement to make payments on this home loan as long as a homeowner meets certain qualifications. Simply put, homeowners often hear that reverse mortgages will allow them to borrow money from equity in their home, use this money however they would please, and not have to make repayments as long as they remain in their home. Also, there are some who have been able to use a reverse mortgage to their advantage and, have remained in their home until they passed away, which meant they never had to make a payment on this reverse mortgage debt, but rather funds from their estate or the simple sale of the home settled this debt obligation.
However, a reverse mortgage is a form of debt that must be repaid eventually, and if certain conditions are not met this could be greatly problematic for a homeowner. As an example, a financial adviser Suze Orman stated, “…it is very important to understand that after you take out a reverse mortgage you will still be responsible for paying the property tax, the insurance premium, and all the maintenance costs for your home. If you can’t continue to cover those costs you will risk losing your home to foreclosure.”
For senior homeowners, keeping up with these costs are one of the major risks that they face, along with issues like a deterioration in their health which may require they move into an alternative living arrangement. Homeowners who go longer than 12 months during which they are unable to claim their home as their primary residence will be required to make repayments on this reverse mortgage, which again, is a danger that homeowners may face if health issues necessitate that they relocate to an assisted living arrangement or move in with relatives.
While, there are benefits and drawbacks to reverse mortgage home loans, homeowners must typically go through reverse mortgage counseling to see how these pros and cons will be present within their personal situation, so that homeowners may make a more educated decision as to whether they should use a reverse home loan. While there are also options, like simply selling a home and moving to a more affordable living arrangement, which may be used as an alternative to a reverse mortgage, before committing, homeowners must consider how their personal situation may benefit from a reverse home loan and what potential factors may cause problems down the road that could require this mortgage be repaid.