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Reverse Mortgage pros and cons?
As a loan officer, I find these to be fantastic for the right people. First of all, they are safe. Here s why. 1. They are backed by the. show more As a loan officer, I find these to be fantastic for the right people. First of all, they are safe. Here s why.
1. They are backed by the government. in other words, you won t here some scandal about them in the future because the government subsidizes them.
2. No matter what happens in the real estate market, the bank can t renig on the loan or make you pay it off even if the balance surpasses the value of your home.
3. They make you go through an educational piece to make sure this is the right plan for you.
4. If you pass away, the bank only recovers the balance plus closing costs and accrued interest. Whatever is left goes to your estate. there is a misconception out there that the bank does these loans in hopes that you ll pass away and they can make a profit on your house. this is not true
5. You ll be able to pull out cash to live off of or invest without making payments.
1. It s pricey. the interest rate is typically higher, the closing costs are higher and interest is earned on the financed closing costs.
2. Your mortgage balance will continue to increase and eat into your equity. If you intend to sell in the future, you need to be mindful of this.
Reverse mortgages are really designed to help the retired continue to live in their existing residences even though their income is lower than it used to be and property taxes and insurance have increased. Removing a mortgage payment offsets these burdens and allows the recently retired to continue to live their same lifestyle and even take out cash to keep in reserves just in case.
This is should not be taken out if you can comfortably afford your lifestyle. The cost is lower and your assets will remain higher.
Source(s): www.caseycasperson.com, loan officer for 7 years.