The Benefits of a Reverse Mortgage
You can stay at home for a longer period of time. As you get older, the varied options for tapping equity allow you more alternatives to address shifting financial demands. Making home upgrades to age in place, for example, with a reverse mortgage may be less expensive than selling and downsizing your property.
You can supplement your retirement income. If you choose to receive refinance reverse mortgage los angeles payments on a monthly basis, you will have a consistent flow of income in your budget.
You can pay off your debts. If you have unpaid medical expenses or high-interest debt, you can use a lump-sum dividend to pay off your balances.
Other retirement accounts can be left alone. Reverse mortgage income may assist you avoid early withdrawal penalties from other accounts in your retirement portfolio.
You'll have more financial flexibility. You can spend reverse loan proceeds on whatever you want, providing you the freedom to pursue what's essential to you and your family. You can help a youngster pay for college or remodel your house to accommodate specific requirements as you or a loved one grows older.
Your reverse income is not subject to taxation. Because the IRS does not consider reverse mortgage payments to be income, they are not taxed – whether you get them in the form of a lump amount, monthly income, a line of credit, or any combination of the three.
You will not leave your heirs a submerged house. Reverse loans have safeguards that restrict your successors' liability for any leftover balance after you die.
There are no debt-to-income (DTI) ratio limitations. Because there is no mortgage payment, less income is required to qualify. A lender will, however, need to see proof that you can keep up with your property taxes, homeowners insurance, and, if necessary, homeowners association (HOA) payments.
After you die, your spouse has the option of remaining in the house or moving out. Though you were married at the time you took out the reverse mortgage, even if your spouse was not a co-borrower on the loan, they can stay in the property after you die or move into a long-term care facility. They must, however, meet certain requirements imposed by the United States Department of Housing and Urban Development (HUD).
The disadvantages of a reverse mortgage
The value of your home will decrease. The loss of home equity is a significant disadvantage of reverse mortgages. Because you aren't paying down your reverse mortgage sum, you will make less money when you sell or have less borrowing capacity if you need a new loan.
You'll have to spend a lot of money up front. Reverse mortgages are more expensive than other forms of home loans, including loan origination fees of up to $6,000, upfront mortgage insurance premiums of 2% of your house's value, and other closing costs.
Other income benefits may be denied to you. Before deciding how to receive your funds, get the advice of a financial planner or an attorney. Why? If you receive reverse loan funds, your eligibility for Supplemental Security Income (SSI) or Medicaid may be compromised.
You will decrease your heirs' inheritance. The equity your heirs would receive decreases as the reverse mortgage balance climbs. They won't be able to keep the house if they can't repay the debt after you die or relocate.