Advantages & Disadvantages of a Reverse Mortgage Home Loan
Advantages of Reverse Mortgages:
1) There are many relatively poor people who have significant equity locked up in their homes. Taking a reverse mortgage help them to pay their living costs for an extended period of time and they do not need to join another job or leave their home.
2) If any one takes reverse mortgage then he/she does not need to pay until he/she dies or change his house.
3) This is income which is coming as a loan and for that reason it is also tax-free.
4) If you live more than expected then also you no need to pay more than the value of your home. For example French woman Jeanne Calmet, who took a reverse mortgage and lived to the age of 121.
Disadvantages of Reverse Mortgage Loans:
1) The home is not expected to be passed on to the home owner’s heirs.
2) Reverse mortgage have relatively high closing cost – it is almost 7% in some cases or over 4x which is the typical closing cost of a general mortgage loan. If you are not planning to stay at your home for at least 5 years then it is not recommended to take reverse mortgage loan.
3) Many old people are there who does not take care about the maintenance of their house and due to this reason they lose equity on their house. If you are that type of person who is maintaining his house properly then you may get same rate and fees compare to a person who is not.
4) Although reverse mortgage is tax free income but that income may affect your ability to get other benefits like supplemental social security ( SSI), Medicaid and Medical benefits.
5) There is a wide range of reverse mortgage options. But all the lenders are not good. Some lenders are disreputable. So you should take the help of a counselor before signing off a reverse mortgage deal.