Reverse Mortgages For Seniors: The Pro’s And Cons

The last thing you want new golden retirement years is to be strapped for cash and not be able to stay in your house.  With the saying stock market lower income, higher medical bills, and higher taxes retirees are finding it harder and hurt to get by. If you are a baby boomer considering retirement in the next 5-10 years you may want to consider a reverse mortgage to pay for travel, buying a separate second-home, or starting a new business. In this article will be reviewing the pros and cons of a reverse mortgage to help you determine if a reverse mortgage solution is for you.

The Reverse Mortgage

Basically, a reverse mortgage is alone against your current home you do not have to pay as long as you live in your home. If you own your home outright, the banks will take cash of your home without you having to move or repay the loan each and every month.  You can receive the cash in several ways. The first is in a lump sum payment. The second is you can receive a payment each and every month. The third  way, is the banks provide you a line of credit. You can manage the line of credit however you see most fit.

The Pro’s of a Reverse Mortgage

There are many positives to a reverse mortgage. Many of the benefits depend on your current financial situation. With the recent decrease in home values, you will want to consider the ramifications of a reverse mortgage.

Some of the positives are:

·         You can keep the title to your home

·         The cash is yours, you can spend it as you see fit

·         You can sell your home whenever you like

·         There is no repayment as long as you live in your home

·         There are no taxes paid on the cash you receive

With a  reverse mortgage, it is just the opposite of a regular mortgage. For once the bank pays you while you live in your home. When you die the loan must be repaid. Or of course, when you sell your home. If you have significant equity in your home, and are retiring in your current home, this solution might be for you. If you are willing your estate to your family, you will want to consider the impacts before you go forward.

The other benefit of a reverse mortgage is that you can literally have no income and qualify.

The Con’s of a Reverse Mortgage

A reverse mortgage is not for all seniors. Some of the negatives are:

·         Expensive. There are usually high costs associated with a reverse mortgage. Take a look at the fee structure before you sign up.

·         There are limits. If your home is worth $400,000 or more, you can only quality for up to $370,000 on the reverse mortgage.

·         Can impact your estate plan. If you are considering a transfer of your estate in your will, check with an advisor on how these plans might be impacted by a reverse mortgage.

All in all, a reverse mortgage is a great solution for seniors that plan on staying in their home, as well have  a need for the equity they have built in their home.