Reverse mortgage loans are somewhat controversial loans. While most experts recognize the obvious benefits that these loans offer, some also warn consumers to tread carefully. The decision to obtain a reverse mortgage is not one that should be taken lightly. While seeking reverse mortgage information, consumers need to make sure that they fully understand both the benefits and disadvantages of these loans.
Honest Reverse Mortgage Information: Disadvantages Every Borrower Must Consider
For well-rounded reverse mortgage information, consumers must know that reverse mortgages do pose certain disadvantages. Most commonly, consumers are warned that reverse mortgage loans are expensive. Like other mortgage loans, these loans accrue interest and are subject to various fees. Borrowers are also required to pay mortgage insurance premiums, have their home appraised, and pay for a HUD-approved counseling session. While most of these costs are rolled into the loan, they must eventually be repaid.
To choose the most beneficial loan, borrowers are urged to compare all of their different options before taking a reverse mortgage. In most cases, home equity loans will be less expensive. The difference is that borrowers must make monthly payments on home equity loans, while a reverse mortgage will not require repayment until a borrower is no longer occupying the residence. Borrowers who are cash-poor typically find this benefit worth the additional cost.
Consumers are sometimes also warned that a reverse mortgage might affect their eligibility for government assistance. Fortunately, while this reverse information is frequently shared, it is only somewhat true. Under no circumstances will a reverse mortgage affect one's Social Security or Medicare benefits.
Medicaid and Supplemental Security Income (SSI), on the other hand, might be affected. Since these programs require individual recipients to have under ,000 in liquid assets and couples to have less than ,000, reverse mortgage proceeds might affect eligibility. However, this is only true if the proceeds are not spent within the calendar month they are received. It is very possible that a reverse mortgage will not affect a person's government assistance at all.
Many consumers also worry about tapping into their home equity too soon. Borrowing against one's equity is always a risk. To lessen this risk, consumers are urged to consider whether now is the right time to take a reverse mortgage. However, it is important to remember that today's low interest rates might not last forever. While seeking reverse mortgage information, consumers should carefully determine the best time to get a loan.
Reverse Mortgage Information: How These Loans Truly Benefit Borrowers
In addition to the negative reverse mortgage information, there are many benefits that lead consumers to these loans. The greatest benefit is that reverse mortgage loans help struggling borrowers stay in their homes and possibly increase their cash flow.
According to the March 2008 Current Population Survey compiled by the Congressional Research Service, over 40% of beneficiaries depend on their Social Security benefits for more than 90% of their income. Today, many seniors are cash-poor but rich in equity. A reverse mortgage allows seniors to convert this equity into usable cash.
Another benefit is that the proceeds of these loans are tax-exempt. Consumers can use their proceeds to pay off their house, pay medical bills, or just enjoy the additional income. Until borrowers leave the home or fail to abide by the terms of their loan, the loan will not need to be repaid. Of the available reverse mortgage information, this unique benefit is what inspires many seniors to choose a reverse mortgage over other loan options.