Reverse Mortgages: Should You Consider One?

Picture of a home

Reverse mortgages are usually taken out by seniors to unlock the equity in their homes. However, there are pros and cons as to whether a reverse mortgage is the appropriate thing to do.

Facts About Reverse Mortgages

Reverse mortgages are mortgage loans taken out by individuals at least 62 years of age. The theory behind a reverse mortgage is that the equity in the home will support the reverse mortgage and the mortgage will be repaid when the homeowners die. Reverse mortgages do not have to be paid as long as one of the borrowers is still living in the home. The funds received from the reverse mortgage can be taken in a lump sum, as a line of credit or in monthly payments.

Reverse Mortgages vs. Traditional Mortgages

In a traditional mortgage the homeowner takes out a mortgage and then makes monthly payments until the mortgage is paid in full. The monthly payment represents both the payment of principal and interest due and owing on the principal. With regard to reverse mortgages, the homeowners do not have to repay the reverse mortgage on a monthly basis. It is usually paid after both of the homeowners die or both of the homeowners are no longer living in the home.

Benefits of a Reverse Mortgage

One of the most significant benefits of a reverse mortgage is the home will not be foreclosed upon and the homeowners will not be forced out of their home because they can’t make monthly payments. Reverse mortgages give homeowners peace of mind knowing they no longer have a monthly payment they need to make to the bank.

Some Disadvantages of Reverse Mortgages

Banks are usually very conservative with regard to how much money they will provide a homeowner with pursuant to a reverse mortgage. When the homeowners die, the homeowners’ heirs will either have to have the home sold to pay back the reverse mortgage or they will have to come up with the balance due on the reverse mortgage. Reverse mortgages generally have higher interest rates than traditional mortgages.

Conclusion

If you are considering a reverse mortgage you should first shop around to several different financial institutions. You should compare the interest rates offered on the reverse mortgage from each of these institutions. If you are not sure as to whether a reverse mortgage is the appropriate avenue for you to pursue, you can consult with an elder law attorney to help you make this decision.Attorney Elliot Schlissel

Elliot S. Schlissel, Esq. is a member of the National Academy of Elder Law Attorneys representing seniors throughout the Metropolitan New York area.

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We represent individuals throughout the New York Metropolitan area with divorce and child custody, personal injury, car accident, wrongful death, estate administration, nursing home and medicaid issues

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