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Reverse Mortgage Disadvantages and Advantages
You have heard about the good and the bad of the reverse mortgage, or the Home Equity Conversion Mortgage (HECM) program. But what is the real truth behind the reverse mortgage program which was designed to assist mature borrowers, 62 and older, with staying in their home while using the current equity to sustain their independence. Some lenders do not provide mature borrowers, like you, with the full details of the reverse mortgage program.
The reverse mortgage program is good and works for your benefit:
• You are allowed access to the equity in your current home to receive various cash payments which are a lump sum, a line of credit and/or monthly payments.
• You do not have to make payments on your reverse mortgage as long as you remain in your home.
• You are free to do what you please with your money. There are no requirements to participate in a savings account program because it is your money.
• You do not have to pay income taxes on your equity loan.
• You maintain the independence you have become accustomed to.
• You are protected when seeking information about the reverse mortgage program because reverse mortgage counselors are now required to be approved by the U.S. Department of Housing and Urban Development, HUD before they are able to speak with you about the program. Reverse mortgage lenders are no longer allowed to refer you to a counselor that is not HUD approved.
There are some reverse mortgage disadvantages also:
• You are expected to pay a lot of expenses associated with the reverse mortgage program and these fees are taken out at closing and reduce the amount received. Such fees include closing costs, mortgage insurance which is mandatory, origination fees and fees the lender may assess over the life of your loan which is reverse mortgage disadvantages.
• You are required to maintain your home, your mortgage insurance premium and your property taxes. If you do not stay in good standing with either one of these requirements you may force your loan to become due earlier than expected.
• Your reverse mortgage loan is not a traditional loan because of the payments you receive without having to make a payment; therefore the interest rates are higher than a traditional loan which is another reverse mortgage disadvanatges.
• If you receive government benefits such as Medicare you may run the risk of losing or reducing your benefit allowance if you have more cash from your reverse mortgage than the program income allowance. Be mindful to only use what you need.
• While you are not required to make payments on your loan while living in your home, payments are due upon leaving your home as a primary residence or upon your death. Which makes the reverse mortgage disadvnatges later in life.
The overall reverse mortgage program is a great income source for remaining independent but the drawbacks of the program should be considered as well. You are encouraged to speak with your loved ones or your financial advisor to determine if the reverse mortgage program is the right program for you and to be sure you understand the reverse mortgage disadvantages.
Reverse Mortgage Disadvantages – Lender
If you would like more information, please call (866) 683-3690 or visit our Reverse Mortgage Calculator. Thank you for visiting information about reverse mortgage disadvantages and advantages.
Tags: hecm Disadvantages and Advantages, home equity loan Disadvantages and Advantages, Reverse Mortgage problems and Advantages, Reverse Mortgage uses and Advantages
