A reverse mortgage is great for retirees who want to have a bigger source of income by using their homes. In this type of mortgage, homeowners are permitted to borrow against their home’s equity while still considered the owner of the house.
The best part of the reverse mortgage is that not like other conventional mortgages, in reverse mortgage the homeowner will not make the payment. It is the lender who will make payment to the borrower in different modes: lump sum, monthly payments, or a line of credit.
A reverse mortgage is only available for people over 62 years old. The reverse mortgage will only be repaid under the following circumstances: the death of the borrower permanently moves from the residence, or if the property is sold. It is called reverse mortgage because it is the bank which pays you instead of you paying the bank. In a conventional mortgage, the equity grows; in reverse equity may shrink.
Pros of reverse mortgage
A reverse mortgage can be a very helpful source of extra income for individuals who want a very comfortable retirement lifestyle. The largest personal investment most retirees have is their home. In many cases, their homes for sale napa are already paid off. A reverse mortgage allows the retiree to stay in his home while receiving monthly payments.
If you are at least 62 years old, your qualification for a reverse mortgage can determine by several factors including the value of your home, your age, and interest rates. You can be eligible the older you are, the bigger the home value is, and the lower current interest rates are.
Cons of Reverse Mortgage
The most common negative aspect of a reverse mortgage is the cost involved. Normally, the whole cost of getting the mortgage is around $30,000 to $40,000. This amount covers certain fees including mortgage insurance, appraisal, title insurance and many closing costs. The cost will not be paid form the borrowers pocket though as it will be deducted from the amount of the loan.
Another major concern that might arise is the requirement to pay back the loan once you decide to move out of the home. This includes leaving your house to enter a full-care nursing facility. The loan becomes payable if you will leave your home for a year or more.
Finally, a reverse mortgage can affect the equity of your estate which will leave less money your heirs.