If you’re a homeowner over the age of 62 and could use some extra money, then you might be looking into taking out a reverse mortgage loan. However, there are both pros and cons into taking out a reverse mortgage loan that you should carefully consider.
Why a reverse mortgage loan is a good idea
The following are some of the reasons why taking out a reverse mortgage loan may be a good idea:
- You’ll be provided monthly payments that you can put towards anything, whether it’s paying off your current mortgage loan, paying your bills or improving your quality of life.
- You’ll no longer have to make any mortgage payments as long as you live in your home and you meet all of your financial obligations in regards to that home, such as property taxes, maintenance, HOA fees and insurance.
- Payments can be taken as a lump sum, monthly payments or as a line of credit.
- You can use the reverse mortgage loan to finance all the associated fees.
- Reverse mortgage loans will not affect your Social Security or Medicare benefits.
- Reverse mortgage loans are non-recourse loans, which means that neither you or your heirs will be liable for any amount of the mortgage that exceeds the home’s value once the loan has been repaid.
Why a reverse mortgage loan could be a bad idea
The following are some of the reasons why a reverse mortgage loan could be a bad idea:
- Interest rates and fees are higher than typical mortgage loans.
- Once you pass away, your heirs will have to pay off the loan. Otherwise, the lender will sell the house in order to recover the remaining balance of the loan. Remaining proceeds of the sale will go to your heirs.
- If you are on Medicaid or SSI (supplemental security income), then a reverse mortgage loan could affect your eligibility.
- If your surviving spouse was not on the loan agreement, then they will be responsible for paying off the loan once you pass. If they are unable to do so, they may face foreclosure and could end up being forced to move out of the house.
Essentially, as long as you read the terms carefully and your spouse or family are in a financially strong enough position to pay off the loan should you pass, then a reverse mortgage loan can be incredibly beneficial. For more information about taking out a reverse mortgage loan, contact us at Alliance Mortgage Group today.