4 Pros And Cons Of Senior Reverse Mortgage
Like all products, also senior reverse mortgage includes good and bad features
,
so it is wise to carefully study this loan type, before the final decision. Good and reliable reverse mortgage information is available, for instance from
this article.
1. How Does A Senior Reverse Mortgage Work?
When in the usual mortgage the borrower pays the loan and the interest back as
monthly payments little by little and on some happy day the whole sum is paid,
in the senior reverse mortgage the borrower gets the sum without having to pay
the monthly payments.
The whole loan plus interests and all the costs will be paid back, at the
closing of the loan. So, what you have paid as a normal mortgage, you use in
the form of a senior reverse mortgage.
The idea is, that you can keep about the same standard of living than during
your active days with this new loan. The amount of the senior reverse mortgage
varies according to your age, the value of the home, current interest rates and
the loan fees.
2. What Are The Cons?
The most often heard cons are all about the costs. There is maybe one
psychological aspect. Because all costs will be paid back, when the loan will
due, the costs are like hidden ones, like the upfront costs, interest,
origination fees and points plus the closing costs.
You have to take a mortgage insurance, which guarantees, that the lender will
get his money in all cases, even if the home value when sold is below the
amount of the senior reverse mortgage.
There is also a danger, that if the homeowner is away from his home for a long
period of time, the lender can claim the reverse mortgage to be repaid.
3. Is Refinancing An Option For A Senior?
Those, who are critical against a senior reverse mortgage say, that the better
option is to take a normal loan against your property.
The problem in many cases is, that to keep the monthly payments on a moderate level, you are able to take only a small loan or to lengthen the loan time.
But the longer loan time is not wise for a person, who is already 75 and the
bigger monthly sum is out of question, because in most cases the idea of the
senior reverse mortgage is to give help for daily expenses.
4. The Question About The Medicaid.
The rules concerning the Medicaid are different from states to states, but the
untapped home equity is not seen as an asset, when an owner lives in his home.
However, the federal laws use $ 500.000 as a home exemption ceiling. If the
home equity exceeds this, one trick is to take a senior reverse mortgage and
use the equity to the lower level.
Before you can undersign the senior reverse mortgage, you have go through the mandatory counseling and that is very good, because they can make different calculations and tell the terms with the street mans language.
It is useful to get many quotes from reputable banks, to understand the
implications of ill health and discover how a senior reverse mortgage will
impact your Medicaid eligibility.
by: David
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