What Are The Pros And Cons Of A Reverse Mortgage

Paul suchecki feb 8 2014 at 12 00pm flickr source.

On top of that because a reverse mortgage is a loan the payments made to you aren t technically income so they re tax free another big plus. The largest personal asset most retirees possess is their home. A reverse mortgage can be a powerful source of funding for individuals who need to increase their income to be comfortable in retirement. Reverse mortgage cons reverse financing is not free reverse mortgages have costs that include lender fees fha insurance charges and closing costs.

And one more thing. A reverse mortgage increases income without increasing monthly payments and allows a retiree to stay in his or her home. Cons and common misconceptions of reverse mortgages. Money from a reverse mortgage is typically tax free.

Pros and cons of a reverse mortgage pros and cons of a reverse mortgage. Use money as you like. Upfront mortgage insurance premium ufmip. With the government insured reverse mortgage hud hecm borrowers have both upfront and annual renewal mortgage insurance premiums mip to pay.

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Depending on the lender your choices may include fixed monthly payments a lump sum payout or a line of credit. Funds from a reverse mortgage can be used to pay off the mortgage but the money can also be spent anyway you d like. In many cases a retiree s home is paid off. Reverse mortgages also offer some flexibility in how you can receive your payments.

These costs can be added to the loan balance. Cons of reverse mortgages value of estate inheritance may decrease over time as proceeds are spent and interest accrues on the loan balance fees are typically higher than with a traditional mortgage such as the following. The fees and interest rates are typically higher than with a traditional mortgage or heloc. As an added bonus you may qualify for the mortgage interest deduction which can help offset some of your tax liability.

A reverse mortgage is a type of mortgage loan that s secured against a residential property that can give retirees added income by giving them access to the unencumbered value of their properties. You can buy long term care insurance put aside for a rainy day travel or pay for your grandchildren s college education.