A reverse mortgage may be one of the immediate solutions for senior people looking for utilizing home equity loan to the best results but there are also some disadvantages of the mortgage that they should take care to understand. Assessing the pros and cons of any mortgage will spare the borrower the problem of landing into some unpleasant situation arising out of such reverse mortgage.
Who Are Eligible
So far as eligibility is concerned, couples above 62 years in age have the option of going for the reverse mortgage borrowing money against their home equity.
The Clichs
However, the reverse mortgage is not a boon without corresponding blemish. Some of the problems related to it are as follows While elder couples may find the method lucrative and a way of getting regular tax free monthly income, it is to be understood that it is not a gift and the money has to be repaid.In case of the reverse mortgage loans also the same has to be repaid.There is the inherent risk of borrower failing to pay the loans timely and losing their most valuable possession, the home in the process.
How it Works?
Reverse mortgage that is also known as the reverse annuity mortgage is Also known as home equity conversion mortgage;An arrangement where the homeowner borrows against the equity of his or her home;He or she will receive regular tax free payments from the lender;It is only those who are 62 years or above that can avail such benefits without selling away their homes;Principal and interest are paid with homeowner's equity.
Major Disadvantages
Some of the major disadvantages of the reverse mortgage are as follows.Reverse mortgage is to be repaid when the borrower dies or sells out the home.Entire loan amount with interest and other charges are charged on the prices of the house obtained or on its auction after the death of borrower.The mortgage virtually means sacrificing the ownership of home by the borrower. It is the lender who owns the home.An expensive plan, the borrower will end up paying much more at the time of repayment than usual since these are rising debt loans.Interests on these loans are not deductible from tax payable.
However, despite the mortgage company holding the title, the home remains officially in the name of the borrower.
