Reverse mortgage pros and cons are weighed prior to applying for a reverse mortgage loan. The reverse mortgage loan is extended only to elder citizens who are 62 years or more. Since the proceeds of the reverse mortgage serve as a source of income for the senior citizens, it enables the borrowers to quench their financial needs to a considerable extent.
If carefully weighed, it is observed that there are more number of pros than cons in this type mortgage loan programs. The pros of reverse mortgage may be summarized as below.
Pros of reverse mortgage loan program:
The most important factor is that the amount, which is received as loan is not subjected to taxes.
The money is not required to be paid back as monthly installments, which is true for the other types of mortgage loans (forward mortgage loan programs).
In case of reverse mortgage loan programs, the borrowers do not have to fear of losing their home due to non-payment of monthly payments.
The borrowers may continue to reside in the premises till the time the house is not disposed off.
The borrower at his own will may utilize the proceeds of the money.
The borrower depending on the convenience of the borrower can select the method of loan disbursal. It may be in the form of monthly payment, a lump sum, line of credit (periodical) or a method adopted by combining all of the above.
The borrower has the discretion to sell off the house when he desires to do so. The repayment of the reverse mortgage loan is made upon the death of the borrower, selling off the house or if the borrower is unable to dwell in the premises for more than a year.
It is a well-known fact that every coin has two sides. Even though, the pros numbers exceeds that of the cons, nevertheless, the lacunae cannot be completely overlooked despite the fact that there are not many. The graveness (of the cons) may be approached at, in differing degrees by individuals.
The cons are summarized as below.
Cons of reverse mortgage:
Even though, reverse mortgage does not require monthly repayment unless, otherwise specified, the repayment can be made through the money obtained from selling the house. The house will have a selling price. In the event, the house is disposed at a price, which is less than the mortgage amount, the “balancing amount” is paid off by the mortgage insurance. If the house is disposed off for more amount of money, the excess money goes to the successors. However, the above are cons, which may be treated as insignificant.