There have been discussions all over the market as to whether the benefits of a reverse mortgage outweigh the disadvantages. This type of mortgage is made for senior homeowners, and one of the main benefits is that it does not involve monthly payments. To understand more of the pros and cons of a reverse mortgage, read on.
No Monthly Payments
You will not be asked to pay monthly payments as long as you are using the home as your primary residence. In addition to that, you will not be required to pay the loan not until you sell the property, pass away or move out of it permanently.
Improves the Quality of Life
The main reason why seniors apply for this loan is to improve the quality of their life. The money received can be used to cater for anything you wish. It is all yours to better yourself and make yourself comfortable at the old age.
Default Risk Is Low
The chances of to default payment are very low because your lender does not ask you for monthly payments. The only time you will be asked for money is if you default property taxes fee, insurance, and other house related fees.
No Underwater Mortgage
It will never happen that you owe the lender more than the worth of your property. Listen, even if the lender gave you more than the actual value of your property, you could only pay back the market value of the property at the time of payment.
You do not have to be creditworthy to get the loan. They will as well not ask you for assets or your current income to give you the loan. As long as you have the property, you are in for the loan.
You Remain with the Property Title
Your lender does not take the title of the house after they have given you a reverse mortgage. Many people have assumed that the bank takes charge, but no, your property remains under your name.
The Loan Balance Grows
The interest rate of the loan grows monthly. The interest rate is accumulated on the principal amount. This means that your loan balance will be increasing monthly.
Tax Cannot Be Deducted
The tax cannot be deducted until you start paying for the loan or sell the property.
Reduction of Heirs Inheritance
As already mentioned, the balance of a reverse mortgage grows monthly. This means that the value of your home reduces as long as you are not paying the loan. If you pass away, your heirs will sell the house, pay the mortgage and whatever remains will be their inheritance. Doing the calculations, you will realize that the inheritance reduces as well.