5 Major Benefits And 2 Drawbacks Of A Reverse Mortgage Loan

A reverse mortgage loan is a special type of loan which is aimed at the senior citizens in the country

. If you are at least 62 years of age and if you own your home as a primary residence, then you may be eligible for this loan. Unlike other mortgage loans, here you don"t have to make regular monthly payments. Instead you are paid on a monthly basis but your equity in your home decreases with time. Anyways, reverse mortgage loans have helped countless homeowners in the country to improve the quality of life post retirement. If you are a senior citizen and have built up substantial equity in your home, then you must be well aware of the benefits and drawbacks of this loan.


Benefits


Improves quality of life


The reverse mortgage proceeds can be used for whatever purposes you want. You can use the money to make some purchase and even to meet basic the necessities. In other words, the money that you earn can be used for improving your life post retirement.


No risk of losing your home


In case of a home equity loan, in the event of non-payment of the loan, you may lose you home. But such risks are wiped out in case of a reverse mortgage loan as you don"t make any payment at all.


Easy to qualify


One important benefit of a reverse mortgage loan is that it is very easy to get qualified. Your credit score is not taken very seriously while approving you a reverse mortgage loan.


Guaranteed by the government


The most commonly used mortgage loan is the Home Equity Conversion Mortgage (HECM). HECM is governed by the Department of Housing and Urban Affairs and it is insured by the Federal Government. Even if the lender defaults in making payments, you still receive the money as the government plays the role of a guarantor.


Tax advantages


One important advantage of a reverse mortgage loan is that the income you earn from it is tax deductible. This is indeed very helpful for the senior citizens in the country.


Drawbacks


There are some distinct drawbacks of a reverse mortgage loan too. The drawbacks are listed below.


Check out if you are eligible for low income assistance


There are many low income assistance programs available in the country. If you have already taken out a reverse mortgage loan, then the income that you earn from it may disqualify you from getting approved for a low income assistance program. Here however you need to keep it in mind that Social Security benefit and Medicare are not hampered by the reverse mortgage program.


Ponder over in case you want to move in near future


In case of a reverse mortgage loan, you receive monthly payments. Here it is to be noted that your equity in your home is used to get the loan but over time your equity in your home gets reduced. In case you have any plan to relocate to any other place, it would be wise not to take out a reverse mortgage loan.


by: Jessica Bennet

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