5 Pros and Cons of Reverse Mortgages for Seniors
Reverse mortgages provide a funding source for seniors without the requirement of monthly payments.
Seniors who are on a fixed income are often reluctant to acquire additional debts.
A reverse mortgage can help seniors secure financing for a variety of goals, while living in the comfort of their home.
What Are Reverse Mortgages?
Reverse mortgages are secured real estate loans for qualified homeowners who are at least 62 years old.
Unlike a forward mortgage with traditional monthly payments, a reverse mortgage enables eligible seniors to borrow a portion of the equity in their home.
How Reverse Mortgages Work?
Reverse mortgages work well for seniors who want to convert a portion of their home’s equity into cash, without the burden of a short-term or long-term repayment schedule.
A new loan is created for eligible borrowers with significant home equity.
Borrowers with a home that’s free and clear of mortgage liens or roughly 50% home equity might qualify for a reverse mortgage.
The proceeds may be received in a lump sum, via monthly disbursements or during borrower-specified intervals.
The loan amount is based on the ages of all borrowers, value of the home, the interest rate and owner occupancy.
Reverse Mortgages Pros and Cons
Reverse mortgages offer a variety of helpful benefits. However, in certain situations, there might be some reverse mortgage pros and cons for seniors.
Here are some of the pros of a reverse mortgage:
Ideal for paying off medical bills, high-interest credit card debt and other items.
Lump sum or periodic payments are not taxable (clarify with tax professional).
Fewer requirements than traditional loans.
Borrower and spouse can remain in the home.
No monthly mortgage payments.
Here are some of the cons of a reverse mortgage:
Must be 62+ to qualify.
Must live in the home.
Lending fees are incurred.
Fewer benefits for heirs (potentially).
Risk of foreclosure if property taxes, homeowners insurance or the property’s condition are not maintained.
Reverse Mortgages for Seniors
Instead of getting a home equity loan, a reverse mortgage for seniors is a lending option that’s growing in popularity.
As more borrowers learn about the pros and cons of reverse mortgages for seniors, funding options to make home improvements or modifications can lead to more alternatives than costly senior living facilities.
What is an HECM?
HECM is an acronym for Home Equity Conversion Mortgage.
Backed by the Federal Housing Administration (FHA), the HECM is among the most popular reverse mortgage programs for seniors.
The FHA has strict requirements for the HECM loan and seniors are required to attend HUD-approved reverse mortgage counseling.
Who Does Reverse Mortgages Near Me?
A reverse mortgage loan can greatly help a senior who needs reliable financial solutions.
Unfortunately, some unscrupulous operators have tarnished portions of the industry.
Therefore, instead of relying on a search for reverse mortgages near me or referring to the popular book, “Reverse Mortgages for Dummies,” a mortgage professional with Mindful Money can answer any questions about reverse mortgages in Arizona, California or Colorado.
Schedule a call today with Samantha Cooley, a licensed mortgage professional who subscribes to ethics and best practices of the National Reverse Mortgage Lenders Association.