Reverse Mortgage - What Are The Pros and Cons?

A reverse mortgage is an effective way if you need money, but you have to make sure you research before you apply it. A reverse mortgage is a way to have more cash so that you can still enjoy your retirement years if your savings, retirement funds, and pensions are not enough to supply your needs after retiring.

Another term for reverse mortgage is the conversion mortgage. You will have cash when you use your home as your collateral. Standard mortgage and reverse mortgage is almost the same, but with standard mortgage the borrower will no longer need to have an income before he can get the cash. Aside from that, there are not monthly payment.

In reverse mortgage, the loan as well as its interest are paid if the property is already sold. You have to follow certain standards before you are qualified for the loan. You have to be 62 years old and more. You must own your house outright or you have a low mortgage balance which can paid from the net of the reverse mortgage. It is important that you live in the house. Single or two to four unit house is the required and you have to live in it. Condominiums and manufactured houses are also allowed as long as they pass the requirements. Prior to the application of the loan, you need to have the form which is approved by the HECM counselor.

The Pros

It is beneficial for the homeowners because the equity of the house can be turned into cash without additional monthly expenses. Lenders don't have the right to force the owner of the house to sell the property just to pay the loan. In reverse mortgage, the owner will have all the years to stay in the house as long as he lives even if the interest as well as the amortization of the house exceeds from its value.

The disadvantages of reverse mortgage

It is costlier to have the reverse mortgage than the conventional mortgage. Most of the time, the fees of the reverse mortgage is high although it is converted into loan and you don't have to pay it immediately. The fees are fixed since the program administrator is the HUD. The financial adviser may also ask money from you because of the advises that he gives. You can research online to know more about reverse mortgage info. See to it that your chosen company is approved by the HUD. Take note that if you don’t have enough gathered reverse mortgage information, you’ll be tantamount to really failing in your application and expectations.

Your house will be automatically owned by the company when you have the loan. That's why you have to make sure that you will calculate all of the costs. Get more advice. Before deciding, talk to your financial adviser and the whole family. Keep in mind that your property is at stake here, so do read some really helpful reverse mortgage faq. The borrower should be able to think clearly even though he is already old. He shouldn't be suffering from dementia or Alzheimer's.