Reverse Mortgage Sarasota | Bradenton | Reverse Mortgage Pros and Cons
Reverse Mortgage Pros and Cons
Hello again knowledge seekers. To try to help my readers in the Sarasota and Bradenton areas better understand the ins and outs of reverse mortgages, I will describe in this article some of the benefits of availing yourself of a reverse mortgage and some of the things to consider in determining whether a reverse mortgage is right for you. I think a good way to do this is to list and explain some of the pros and some of the cons of a reverse mortgage.
Reverse Mortgage Pros:
1. The lender pays you for the equity in your home. Rather than make a monthly payment to the lender as is the case with a typical traditional mortgage, with a reverse mortgage the lender pays you. In general, you have the option of being paid out of the equity (value) in your home taking of taking a lump sum (usually in 2 phases) or getting a line of credit or a combination of the two.
2. You stay in the home without making any payments.
3. It can be used to pay of an existing mortgage. You can pay off an existing mortgage that does require you to make monthly payments.
4. You are not personally liable to repay the loan. This is a great benefit. The lender only has right against the home, not you personally. As a result, they are only permitted to recover repayment under the reverse mortgage up to/limited to the value of the home. This is true even if the balance due under the mortgage loan greatly exceeds the value of the home at the time the loan must be paid off.
5. Your heirs may inherit the home after they pay off the balance owed under the reverse mortgage loan.
6. You do not need to have a good credit score. This is another great benefit. You may qualify for a reverse mortgage regardless of your credit score.
Reverse Mortgage Cons:
1. The amount due under your reverse mortgage increases over time. Unlike a traditional mortgage under which your monthly payments go toward reducing the amount you owe, under a reverse mortgage, the balance due under your loan goes up over time as interest accrues.
2. The fees associated with a reverse mortgage are typically higher than those of a traditional mortgage loan. The good news is that the fees can be deducted from amount of the loan. They do not have to be paid by you out-of-pocket.
3. Many people simply do not understand reverse mortgages. I hope this article and other articles I have written on my website will help you understand reverse mortgages. They are unique “animals” so please do not feel embarrassed if you are confused and don’t completely understand them. I invite you to give me a call anytime so that I can do my best to help you understand them more fully.
