Reverse Mortgage Pros And Cons

Imagine taking the lifetime of mortgage payments and getting them back, in installments, or all at once in one large sum. This is effectively the result of a reverse mortgage.

Popularity in reverse mortgages has increased steadily since the 1960s, when they first became available. The rules and regulations have had minor transformations over the years, but the basic concept has been and remains that seniors can stay in their primary residence while receiving income from the equity on their property. Those who are eligible include seniors 62 and older who either own their home fully, or have a low enough mortgage balance to pay it off at closing with the reverse mortgage proceeds.

The benefits of a reverse mortgage are fairly clear, but certain hidden costs may not be addressed until the closing, such as origination fees and interest costs. These are the ways that lenders can make extra money, and there are a few who may try to take advantage of seniors by tacking them on at the last minute when the ball is already rolling. This is one reason the FHA requires counseling before seniors can take out a loan. As long as these added costs are weighed from the beginning, homeowners can make informed decisions that do benefit them in the long run.

Another possible snafu when it comes to reverse mortgages is that the added income can interfere with Medicaid qualifications. Home equity is usually not factored into Medicaid eligibility, but when equity is turned into cash it may be a different story. Additionally, seniors with unstable health have a higher likelihood of extended nursing home or other medical stays. This could mean that their home is no longer their primary residence, and they would no longer qualify for their reverse mortgage.

For some, an emotional element is a factor when considering the reverse mortgage. Though they still live in their home and own their home, taking all that hard earned equity make some homeowners apprehensive. Family members may also be affected when elder family members take out a reverse mortgage and their inheritance shrinks. On the other hand, the quality of their parents’ or grandparents’ lives may be worth more to them than an inheritance!

Most of the cons of a reverse mortgage can be addressed or eliminated if seniors become well informed about their particular circumstances and options, and appropriately counseled by an objective third party as required by the FHA. A reverse mortgage can help prevent foreclosure on seniors’ homes, increased and delinquent debts and the disarray that comes from having too little money. It can be an opportunity to receive a deserved return on a lifetime of hard work. Reverse mortgages are a time-tested option that, carefully and seriously considered, may create the distinction between seniors’ retirement years and their golden years.

The story is provided by Reverse Mortgage 360. For more information visit Reverse Mortgage 360.