What Are the Pros and Cons of A Reverse Mortgage?
Mortgage payments, like any large loan, can make homeowners anxious. Most people understand how mortgages work: an individual borrows money from the bank to help finance the house, then makes monthly payments to pay off the debt. The loan must either be paid off in full or the home must be sold, which ends the mortgage payments for that particular property. A reverse mortgage works the opposite way. This type of home loan converts a property’s equity into cash payments. Some homeowners select to receive monthly installments or a large lump sum all at once. The reverse mortgage process may be a viable option for certain people, depending on their situation. There are also some qualifications that must be met for an individual to be considered eligible for this financial opportunity.
Do I Qualify for A Reverse Mortgage?
Reverse mortgages are not available for all homeowners, especially not young ones. Those individuals wishing to take advantage of this type of loan must be at least 62 years of age and own most of their primary residence. It is possible to have an outstanding mortgage on the house; however, it should be less than 50 percent of the home’s value.
Qualifying for a reverse mortgage and being a good candidate are two different things. For people who do not have a significant amount of savings or adequate income, reverse mortgages may be a good option. But for those who have a sufficient income and would be open to selling their home for equity will typically sell their home and downsize to save money instead.
The Advantages and Disadvantages
Reverse mortgages can be a good alternative for those homeowners without a steady income. The equity of the home is turned into cash without having to go through the hassle of moving from one house to another. If a person elects to have monthly payments, the income can last for years. Because the reverse mortgage is a loan, it becomes tax free and will not affect any Social Security or Medicare payments.
The reverse mortgage process can be helpful for some people, but it also has its drawbacks. Reverse mortgages do have fees tied to them, and failing to keep up with the monthly payments can cause someone to lose their home. The debt also increases every month. Unlike a mortgage payment that an individual is paying off little by little each month, the loan balance of a reverse mortgage increases each month.
Contact a Long Island Sound Real Estate Lawyer
Like any loan, a reverse mortgage can either help keep a homeowner afloat or become a burden if someone does not understand how it works before signing the financial documents. An experienced real estate attorney can provide you with sound legal advice and assistance when making an important financial decision regarding your property. At the Law Offices of Peter V. Lathouris, LLC, we have represented Fairfield County-area real estate clients for over 30 years. If you are considering signing for a reverse mortgage, contact our Stamford, CT residential real estate attorneys today.