The disadvantages to a reverse mortgage can be devastating to the ones you love. These loans essentially buy your home, leaving your children and loved ones without the family home when you die. Research the disadvantages of a reverse mortgage loan before making any decisions.
What are Some Disadvantages of a Reverse Mortgage Loan?
Some disadvantages to a reverse mortgage loan are the costs associated with the loans. The interest rates are significantly higher than a traditional home loan, or cash loan. Because of the high interest rates, and higher closing costs, the equity in the home is used up quickly. The loans ensure that you as the homeowner do not have to pay anymore mortgage payments during the time you are alive and able to live in the home. When you die, or are no longer able to live in the home, the bank takes possession. Any equity that is left from the sale of the home, will be turned over to you or the inheritors of your estate.
Who Should Consider a Reverse Mortgage Loan?
Reverse mortgage loans should only be considered when a senior homeowner needs extra income to survive, and they have no heirs in which to leave the home to. A person can only apply for a reverse mortgage loan if they own their home, or are close to paying it off. There must be substantial equity in the home for a bank to consider it.
Can a Reverse Mortgage Loan Effect My Medicare?
Yes, a reverse mortgage loan is considered income in most cases, and is another disadvantage to a reverse home mortgage loan. This may change your ability to receive government funded medical or social security programs. It is important to with a loan counselor if you are considering a reverse loan mortgage
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