Reverse Mortgage Pros and Cons

HECM reverse mortgages are exactly what they sound like. A reverse mortgage is the same as a conventional mortgage except that it is taken from you when you stop living in your home and pass it on to your children when they are ready to take over. If you plan to sell your home soon, it may be time to consider these options.

In a reverse mortgage, the amount borrowed is only for a limited period of time, such as ten years or five years or even shorter. This will ensure that your loan will not get out of hand in the years ahead.

There are many advantages to the HECM reverse mortgage. However, you may be concerned that the repayment of this loan would be too much of a burden, especially if you live alone. Here are a few things to keep in mind.

You can transfer the equity to your children before you die, then use the money for anything you need. It also enables you to have the benefit of a second income stream. This is possible even if you are only planning to remain in your home for five years or less.

Most importantly, it is possible to retire early with a reverse mortgage. Many people get married, buy a house, have children, and when they retire the home is paid off. Although your heirs will inherit the mortgage, there is no obligation to continue the mortgage at all.

On the other hand, a traditional mortgage involves some form of prepayment penalty that goes into the equity. This would be difficult for some people to afford in the future. The equity for a reverse mortgage can be used for any purpose or income need.

You can start an account at any time without having to worry about the equity in the home. You do not need to make monthly payments and you do not have to sell the home in order to get the funds. As long as you continue to pay the interest on the account at least half the amount of the mortgage every month, you do not have to worry about a decline in the equity in the home.

Another advantage of a reverse mortgage is that you do not have to worry about home insurance. The mortgage payments are tax deductible. For these reasons, it is advisable to pursue these loans when you begin to experience a decline in your standard of living.

You will be able to enjoy life with a flexible income with the equity in your home. Since you don’t have to make a regular mortgage payment, the equity allows you to enjoy a lifestyle that is similar to when you lived in your home. The monthly payment can go towards any purposes that you desire.

If you plan to move soon, you can withdraw funds from the account and continue to live in your home. This can give you the freedom to find another job or travel the world without worrying about losing your home. Again, the mortgage payments are tax deductible.

It is important to determine the pros and cons of a reverse mortgage before making a decision. Your financial situation is unique and will determine the outcome of the decision. Determine all of your options and only use a reverse mortgage if you are 100% sure you can afford it.