Advantages and disadvantages of reverse mortgages
It is important that elderly home owners should weigh the pros and cons associated with reverse mortgages before offering their properties for these long term loans. A borrower should use the internet and other resource centers in order to gather as much information about reverse mortgages as possible. This is quite important in that it helps in ensuring that the borrower is fully aware of the implications that come with these types of loans. This is due to the reason that reverse mortgages are complex financial decisions that have great implications on the ownership of a home property. It is also important to ensure that the borrower is aware of the impact that the loan can have on the property’s equity and residual value.
The main benefit of a reverse message is the fact that it has a higher free income.This income is usually quite important to an elderly person especially given the fact that he/she does not have any substantial income. You can also use the loan money in order to pay off the remaining mortgage debt on the property. This is very important in clearing your name and also in improving your credit score. The borrower remains the legal home owner and is the sole beneficiary of any increments and appreciations on the property’s value.
A reverse mortgage has limited liability in that the borrower can not use any other property in order to cover the mortgage loan. This is very important in enhancing the security of other properties owned by the borrower. In cases, where the property’s equity is not enough to meet the repayment cost of the mortgage, other personal properties can not be sold off in order to cover the costs of the mortgage. In addition to this, a reverse mortgage has no limitations to the number of borrowers who can apply for this long term loan. In this loan, a maximum of 3 borrowers are accepted. The only qualification that the borrowers need to satisfy is that they should all be more than 62 years (or equivalent minimum age requirement) and that they should live permanently in the property.
The main drawback of a reverse mortgage is the high costs incurred while covering the loan. These long term loans are usually costly and expensive to manage and cover as compared to other mortgages. Due to the high costs incurred in covering these loans, it is usually very important to ensure that you are able to carefully research the best competitive loan package offered for reverse mortgages.
What is more disadvantageous about these types of mortgages is the fact that the rules and regulations of these loans differ from state to state. One of the most common regulation of these loans is that you require to be retired and of old age( minimum age limit is 62 years).As such, the loan may not be of great economic importance as compared to when it is given to younger person. In addition to this, reverse mortgages tie the property owner to their property(s) until the owner dies or the loan is fully paid. This denies most home owners an opportunity to get high quality care from special homes such as nursing homes.