Reverse Mortgage Pros and Cons

Reverse mortgages can provide senior citizens with the money they need without adding another monthly payment to their budgets. They can be used at the recipient’s discretion, funding home repairs, preventing foreclosure, providing extra monthly income, or providing money for any other needs.

As with any lending arrangement, there are pros and cons to a reverse mortgage. Here are some of them:

Pros

• You can get the money you need without placing an additional burden on yourself each month. A reverse mortgage does not have to be paid back until the homeowner moves out, sells the home, or dies.

• You have several options to choose from regarding how you receive your money. You can receive the proceeds from your reverse mortgage in a lump sum, in monthly payments, or as a line of credit from which you may borrow as needed. You can even combine the options to have a line of credit and a monthly payment, a lump sum and a monthly payment, or a lump sum and a line of credit. This allows for great flexibility to meet your specific needs.

• There is no monthly income requirement. Traditional mortgages require recipients to make a certain amount of money each month so that they will be able to make their monthly payments. But because a reverse mortgage requires no monthly payments, no income requirements exist. You can have $0 in monthly income and still qualify for a reverse mortgage.

• The amount owed can never exceed the value of your home. In some situations you can borrow more money than your home is worth, but your debt will never exceed that amount.

Cons