When it comes to the advantages and disadvantages of a reverse mortgage, think of them in the perspective of how they may impact your individual financial objectives and financial needs. Be realistic and honest about your plans and assessments.
The purpose of a reverse mortgage is to help the owner to pay off his or her current state mortgage. In other words, it is to allow you to borrow against your existing home equity and use it as capital to make improvements to the home. You may not need to live in your home as the new mortgage will be paid off in full at the end of the term. This is generally considered a very favorable way to finance the purchase of a home because it helps you to create equity for your future use.
If you live in a rental or foreclosure home that has no equity left and no other available funding sources, you may want to consider applying for a reverse mortgage. In addition, if you have been making your payments on your mortgage with no success in making any progress towards meeting the obligations, consider seeking help from a loan modification specialist who may be able to help you with your financial needs.
Another advantage to a reverse mortgage is that the equity you can build up will increase with time. You may only be able to increase your equity by using your own savings, but at some point, you will be able to access the funds you have accumulated. This type of investment has a number of benefits for those who have equity available in their homes. It can help them reach their goal of achieving a “home equity” loan, provide additional cash for medical expenses, improve the value of the home itself, and provide a source of long-term income.
There are a number of disadvantages to a reverse mortgage as well. In most cases, you must be 62 years old or older and own a home to qualify.
There are a variety of reasons why people choose to finance their lives with a reverse mortgage, but one of the most common reasons is the ability to achieve financial security when you have equity available in your home to cover your mortgage.
You are always going to have the opportunity to sell your home if you choose to. This allows you to keep the equity in your home rather than having to move or put the proceeds into the bank to repay the loan. If the value of your home increases substantially, you may even be able to sell it for more than the equity you have on your home.
A drawback to using this method to supplement your mortgage is the lack of availability of the equity. If you are unable to get another mortgage and you decide to sell your home, you will not have the money needed to repay the reverse mortgage. Another disadvantage is the inability to get equity loans if the equity on your home is less than the balance due on your mortgage.
One of the major advantages of a reverse mortgage is the equity you will accumulate will provide you with a steady source of cash flow without the need to borrow any equity out of your home. If you have equity available, you will find it easier to make future purchases of your own home when you are retired and don’t have to depend upon loans or credit cards to make ends meet.
With equity in your home, you have greater flexibility in terms of which home you choose to live in. This flexibility provides you the opportunity to find a home that suits your family’s needs better and also allows you to save money when purchasing an older home.
When considering applying for a reverse mortgage, you must weigh the pros and cons to see which is the best method for financing your future. For many families, they find the benefits outweigh the disadvantages. When you use this type of financing wisely, you will find that it will help you enjoy the flexibility of having additional funds available to pay your mortgage and purchase a home that is right for your family. There are other options available when considering this type of financing.