One of the first questions most individuals ask when considering a reverse mortgage is, “Are reverse mortgages safe?” This is a reasonable question and surely a serious concern. After all, you’ve put your life and security into your home; losing it would be devastating. The truth is, reverse mortgages work in much the same way as a regular mortgage, leaving you the owner of your home, along with the owner of liabilities like insurance, repairs and taxes. While there is risk involved with a reverse mortgage, it is no greater than the risk associated with a traditional mortgage.
What Is A Reverse Mortgage?
Reverse mortgages are actually very simple and are ideal for individuals in a number of situations. In a reverse mortgage, there is not a requirement that the home loan be repaid, assuming the homeowner stays in the home. No monthly payments are required with a reverse mortgage because it uses the equity in the home. These mortgages are available to homeowners that are at least 62 years old, allowing them to use the equity in their property without the need to sell or repay the entire loan.
Benefits Of A Reverse Mortgage
There are a number of benefits with a reverse mortgage. There is no need to repay the loan amount, as long as the borrower stays in the home. No income is required to qualify, and credit history is not a factor, only age and the value of the home. Any money received from a reverse mortgage loan is also not considered income and is not taxed.
Are Reverse Mortgages Safe?
So are reverse mortgages safe? Reverse mortgages are very safe because there is no way to default on the loan as you aren’t required to make monthly payments. The only catch to a reverse mortgage is this: when you pass away, your heirs will need to pay off the loan to retain the home. This can be done by selling or refinancing the home, however, leaving options available to family members after you die.
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