A reverse mortgage is a loan that gives homeowners aged 62 years and above, the opportunity to earn an extra income by letting go of a portion of their home equity. In addition, the repayment period is not specified, but the lender can reclaim the ownership of the property if the owner dies. Unlike other loans, reverse mortgages are easy to obtain, since the applicant credit score and income are not subjected to scrutiny. Before getting a mortgage loan, it is imperative to understand the reverse mortgages pros cons.
Pros
With this type of a loan, you will be in a position to accomplish the following:
Supplement your income, which will come in handy if you need to pay for unforeseen medical expenses or a boost pack for improving your home.
Be in a position to determine whether the borrower should be paying you in lump sum, in monthly installments or through a credit line.
You will not be subjected to monthly loan payments unless you die, move house or sell your current home. In this case, the loan plus the accrued interest is payable immediately.
Cons
The origination fee will be double compared to the amount you pay on a normal mortgage
You may get confused or settle for a wrong reverse loan, since there are many types of reverse mortgage loans. However, attending approved HUD workshops or meetings may help you make a good decision.
Reverse loans may affect your eligibility for Medicaid and other federal programs, which provide for your medical cover.