Reverse Mortgage Loans Pros and Cons

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Reverse mortgage loans are special types of loans that are specifically designed for retirees as a way of helping them meet their financial needs as they approach old age. To seniors, a reverse mortgage is a very important financial tool for them to use. On the other hand, lenders and lending institutions see reverse mortgages as a great investment ventures that are meant to give them  great  income especially in the long run when collecting the loans. There are different situations whereby lenders end up being home owners especially when the loan is not repaid back.

Common pros and advantages of reverse mortgages are such as:

Repayment of the loans

One of the greatest advantages of these loans lies in the fact that the repayment procedures are very friendly to borrowers. This is specifically due to the reason that the borrower is not required to make any regular monthly requirements like it is required in other loans. Other than not submitting any regular monthly repayments, borrowers are exempted from the repayment of the loans as they only mature when the borrower dies. As such, the responsibilities to repay back the loans are passed to heirs and beneficiaries.

Qualifying for the loans

It is quite easy to qualify for these loans as long as you are over 62 years of age and legally own a home/estate. These are the eligibility standards that are set for applicants to fulfill before getting the loans. There is no income and or asset that is required to act as security while applying for these loans. This is due to the reason that the home’s equity is used as security of the loan therefore eliminating any other physical and tangible asset for use as security. In addition to this, the programs offered for reverse mortgage packages are mandated by the federal governments thereby protecting the interests of borrowers.

Cons and setbacks of reverse mortgages are such as:

High processing fees

While applying for these loans, there are a number of processing fees that are incurred by borrowers. These fees may be inclusive of the services required for hiring the services of financial advisors in order to offer quality advice to borrowers before applying for these loans.

Taxation and maintenance costs

Despite the fact that reverse mortgage loans are not subject to taxation, it is important to note that the property is still subject to taxation. These taxes are paid for by the homeowner, a fact that cuts on the amount of money that the borrower receives as loan. In addition to this, homeowners are also required to pay regular maintenance costs of the property. The homeowner is only exempted from making these payments in the event that he/she dies  leaving the responsibility and management of the property to its heirs.

Age limitation

Reverse mortgage loans come with a limiting age factor. This is whereby the loans  can only be given to individuals and couples whose ages  is over  62 years of age. Applicants who have not reached this age limit are automatically disqualified from benefitting from the loans, a fact that can lock out many homeowners.



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