What Are The Pros And Cons Of A Reverse Mortgage

These costs can be added to the loan balance.

A reverse mortgage is a type of mortgage loan that s secured against a residential property that can give retirees added income by giving them access to the unencumbered value of their properties. A reverse mortgage can be a powerful source of funding for individuals who need to increase their income to be comfortable in retirement. Paul suchecki feb 8 2014 at 12 00pm flickr source. Funds from a reverse mortgage can be used to pay off the mortgage but the money can also be spent anyway you d like.

In many cases a retiree s home is paid off. And one more thing. The largest personal asset most retirees possess is their home. A reverse mortgage increases income without increasing monthly payments and allows a retiree to stay in his or her home.

Use money as you like. With the government insured reverse mortgage hud hecm borrowers have both upfront and annual renewal mortgage insurance premiums mip to pay. Cons of reverse mortgages value of estate inheritance may decrease over time as proceeds are spent and interest accrues on the loan balance fees are typically higher than with a traditional mortgage such as the following. Reverse mortgages also offer some flexibility in how you can receive your payments.

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The fees and interest rates are typically higher than with a traditional mortgage or heloc. The cons of reverse mortgages reverse mortgages can have higher closing costs vs traditional loans reverse mortgages can be expensive loans due to upfront financed closing costs. Pros and cons of a reverse mortgage pros and cons of a reverse mortgage. Cons and common misconceptions of reverse mortgages.

As an added bonus you may qualify for the mortgage interest deduction which can help offset some of your tax liability. Depending on the lender your choices may include fixed monthly payments a lump sum payout or a line of credit. On top of that because a reverse mortgage is a loan the payments made to you aren t technically income so they re tax free another big plus. Reverse mortgage cons reverse financing is not free reverse mortgages have costs that include lender fees fha insurance charges and closing costs.

You can buy long term care insurance put aside for a rainy day travel or pay for your grandchildren s college education. Money from a reverse mortgage is typically tax free.