Examining The Pros And Cons Of Reverse Mortgages

Everything in life pretty much has pros and cons. Except maybe chocolate cake. Reverse mortgages is one of the many options available to Senior Citizens who have equity built up in their home, in order to pay them one lump sum of cash to live on. This can be an enormous benefit to seniors who have no retirement to speak of, or who are receiving very little from Social Security. In fact, a reverse mortgage can make the difference between a wonderful retirement and a miserable one, all without ever having to give up your home while you are still alive. Let’s go over the pros and cons of reverse mortgages.

First of all, before we take a look at the pros and cons of reverse mortgage, let’s discuss exactly what a reverse mortgage is. A reverse mortgage allows senior citizens to take out a loan equal to the equity in their home, to live on until they pass away. The loan does not have to be paid back, however, upon their death the home goes to the bank. This can be a major benefit for seniors who have no retirement plan, but what are the pitfalls of reverse mortgages and how does one qualify for one. Are they right for your particular situation?: Only you can decide if a reverse mortgage will work for you.

The pros and cons of a reverse mortgage can be first examined in whether or not you want to bequeath your home to someone when you die. If you take out a reverse mortgage then the equity in your home goes away and your house belongs to the bank. You can live in it, as long as you are alive, and you can move out at any time if you so prefer. Reverse mortgages pros and cons mainly revolve around whether or not you have other options. For instance, if you have plans for your home then a reverse mortgage will essentially eliminate these plans.

You don’t necessarily have to lose your home to a reverse mortgage either. The reverse mortgage requires that the loan is paid back upon moving or passing away. If you happen to have the money to  pay the loan off then you won’t have to lose your home. Qualifying for a reverse mortgage is easy as well, you simply have to be a senior aged 62 or older. So, if you are the correct age and you will be coming into money very soon, and plan to move out of your house when you do, a reverse mortgage may allow you to get cash now and still keep your home later, essentially, having your cake and eating it too.

However, in this type of situation most people simply take out a home equity loan. Reverse mortgages are specifically intended to not be paid back for a certain period of time, when the senior citizen passes on, or when they move to warmer climates or a retirement home. Reverse mortgages may be the solution to a cash strapped senior couple that has some equity built up in their home, but no money to retire on. This type of mortgage could mean that the person could travel, or remodel or use the money to move, and make payments on the loan amount.