What is a reverse mortgage?
A reverse mortgage is a loan agreement between the borrower a lender where the homeowner borrows against the equity or the value of the home. The homeowner can get the loan a one-time thing or it can be arranged so that the borrower can receive a steady monthly amount. This kind of loan will not require a repayment unlike the other kinds of loans such as construction loans or conventional loans.
Reverse mortgage pros and cons
Before you go and apply for a reverse mortgage
or go online to check a reverse mortgage calculator to check if this is something that you should do, better be aware of the pros and cons. Just like any other loan, there are benefits but there are also downsides.
One of the downsides is that the home you are going to use against your reverse mortgage application
will not be passed on to your heirs. Once the borrower passes away or moves to a permanent assisted facility the loan is automatically considered as paid. If in case the value of the home is more than the remaining balance of the reverse mortgage, then whatever the excess money after paying off the mortgages principal, insurance, interest, and other fees will go to the homeowner if still alive or the heirs, whichever the case may be.
Another thing that needs to be considered is that if a spouse, children, or whoever is living with you when you avail of a reverse mortgage, they will not have any right to continue staying in the home when the owner, or principal borrower, passes away.
Reverse mortgage requirements
If you think that a reverse mortgage is for you, then it is not that difficult to apply for it. Just make sure that you are at least 62 years old and living in the home that you want to use as collateral for your reverse mortgage. You may have taken out a home mortgage against your home already but if you have at least 50% equity, then you may still be eligible to take out the loan. You can even pay off the current mortgage so that you can enjoy a much healthier cash flow.