Nowadays, there are many people marketing reverse mortgage loans. These loans are a hot trend now, and they are getting cash coffers into many seniors. Although you may believe all the hype, you need to understand that any good thing has its pros and cons. This is the same case with reverse mortgage home loans. Therefore, before going for them, you should consider the benefits and pitfalls, advantages and disadvantages of them.
Pros and Cons
A reverse mortgage is another form of getting cash from your home. Previously, you had to sell the house or use it as collateral for loans, which you pay back in monthly instalments. On the other hand, reverse mortgages are the type of loans where the amount borrowed is not repaid back as long as the owner of the home is living in that home. The loan is only repaid when a borrower dies or moves out permanently out of the home or when the house is sold. Lenders pay the loan amount in three ways, monthly payouts, lump sum, or line of credit. In reality, this is a big advantage for the elderly.
Types of reverse mortgage loans
These types of loans include single purpose, private proprietary reverse, and home equity conversion. The latter is the most popular loan that is backed by mortgage insurance. Single purpose loans remain to be the cheapest. Unfortunately, you are required to use them for a single purpose. This can be paying property taxes or home repair. If you are looking for low-cost mortgages, which you can use for various purposes, HECMs are the recommended ones. One of the reasons to support them is because the government insures them.
Reverse mortgage home loans can be considered like wine: as it becomes older, it better it gets. In this type of loan, you will get more money if you are older. To qualify, you need to be over 62 years and you must be the owner of the home. You should note that not all homes are eligible. For instance, trailer homes are not eligible. Homes that qualify include detached homes, dwellings, and approved condominiums
Before getting this type of loan, you need to consult a designated counselor. In fact, if you are not careful, you can find that these types of loans can cause a negative impact on your finances. The credit consultant needs to point out all pitfalls, cons, and disadvantages.