Homeowners who have paid off their mortgage in full or almost so may be eligible for a reverse mortgage. Only principal residences qualify for reverse mortgages, and borrowers must be 62 or older to qualify. The funds from a Refinance Reverse Mortgage Los Angeles can be received in a single amount or as an ongoing line of credit.
Disadvantages and Advantages of Getting a Reverse Mortgage
Before signing any paperwork, you should know the ins and outs of a reverse mortgage. Listed below are some advantages of a reverse mortgage and some things to watch out for when evaluating this vs. other loan options.
A Good
A reverse mortgage can be your lifeline if you are concerned about paying your monthly bills or other essential responsibilities.
A reverse mortgage can help a homeowner avoid moving out of her home if she is in danger of losing her current one due to age or other factors.
With the money from the loan, the borrower can finally get rid of their mortgage and put those payments behind them.
If a borrower abides by the loan agreement, they won't have to make any payments until the property is sold or they pass away.
Money from a reverse mortgage is not considered taxable income by the Internal Revenue Service (IRS), unlike retirement income from 401(k)s and IRAs.
If the current worth of your house is less than the remaining balance on your reverse mortgage, your heirs will only be responsible for paying the difference.
Income and credit standards are often unnecessary to qualify for a reverse mortgage.
The Negative
However, the drawbacks of a reverse mortgage exceed the advantages for many homeowners. Prior to getting a reverse mortgage, you should think about these potential drawbacks.
Numerous reverse mortgage scams target elderly people who are struggling to make ends meet.
There are additional expenses associated with reverse mortgages, such as origination fees and mortgage insurance of up to 2.5% of the home's appraised value.
The majority of interest rates are variable, which means they might rise over time, making borrowing more expensive.
Interest is added to the outstanding balance of a loan rather than reducing it; thus the total amount owed to the lender grows over time.
Reverse mortgage interest isn't tax deductible in the same way that principal and interest on a standard mortgage are.
Your home's value and the amount of money your heirs receive from your estate may decrease if you take out a reverse mortgage.
There may be stringent upkeep restrictions put in place by reverse mortgage lenders to ensure the property retains its value.
Mortgage prepayment may be required if the borrower breaches the contract by, for example, failing to pay property taxes or failing to keep the house in good repair.
Similarly, a reverse mortgage can go into default and lead to a foreclosure if the terms aren't met.
The availability of need-based retirement income sources like Medicaid and Supplemental Security Income may be impacted by reverse mortgage funds (SSI).
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