5 Killer Pros And Cons Of Reverse Mortgages For Top Benefits

First, a borrower can never lose his home to the lender

, if he follows the loan terms. Second, most of the negative information and opinions come from the costs of the reverse loan. To get a full picture about the program, it is important that a borrower, who thinks to take the reverse loans will meet the counselor with a question list and will ask also about the negative things.

1. The Costs Of Reverse Mortgages.

When we think about the pros and cons of the reverse mortgages we usually start to speak about the costs and upfront fees. The upfront fees, the origination fee and the compulsory mortgage insurance are those, which makes the reverse loans more expensive compared to the usual mortgage.

And then there is the question about the accrued interests. If a borrower takes a lump sum payment with a long repayment time and variable interest rate, it can happen that the interests will be the biggest element of the back payment bill. Because nothing will be paid back during the running time, this can become as a negative surprise to the borrower.

2. The Position Of The Heirs.

There are still heirs, who honestly do not want to understand, that the parents really need the money, which the reverse loan program will take. It is true, that the reverse mortgage eats the future heritage money. However, we have to understand, that the seniors have paid the usual mortgage, i.e. the equity of the home and they have a full right to use the money as they will. A senior makes it wise, if he or she will talk to the heirs about the reverse loan, so it will not come as a surprise.

3. The Medicaid Danger.

Usually the reverse loan does not mean, that a senior will lose the eligibility to Medicaid program. However, the different states have different rules about this. A senior must be careful especially with the lump sum payments and with those lender payments, which are not used during the same month as they have been received.

4. The Benefits Of The Reverse Loans.

The benefit list is long, because these loans are planned for the seniors. The target of the whole system is to arrange cash money for a home owning senior to whom the home equity is the only source of an extra money. The qualification is extremely simple. A senior, or maximum three seniors, can qualify, if he or they own a home, where he or they live permanently and where is enough equity. The borrower must be atleast 62.

5. No Credit Nor Income Check.

Because the home equity is the only guarantee, the lender does not require a credit or income statement. A borrower has to take an obligatory mortgage insurance. This means, that a borrower will never owe more, than the equity of the home and his other assets will never be used to pay away the reverse loan.

by: Juhani Tontti

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