Reverse Mortgage Information: The Benefits and Disadvantages Consumers Need to Know

Reverse mortgage loans are somewhat controversial loans. While most experts recognize the obvious benefits these loans offer, some also advise consumers to exercise caution. The decision to obtain a reverse mortgage should not be taken lightly. When looking for information on reverse mortgages, consumers should make sure they fully understand the benefits and drawbacks of these loans.

 

Honest Reverse Mortgage Information: Disadvantages Every Borrower Should Consider

 

For complete information on reverse mortgages, consumers should know that these loans have certain disadvantages. Consumers are generally cautioned that reverse mortgages are expensive. Like other home loans, these loans bear interest and are subject to various fees. Borrowers must also pay mortgage insurance premiums, have their home appraised, and pay for a HUD-approved counseling session. While most of these costs carry over to the loan, they must eventually be repaid.

 

To choose the most beneficial loan, borrowers are urged to compare all of their different options before obtaining a loan. In most cases, home equity loans will be less expensive. The difference is that borrowers must make monthly home equity loan payments, whereas a reverse mortgage will not require repayment until the borrower is no longer occupying the residence. Borrowers without cash often find this benefit worth the additional cost.

 

Consumers are also sometimes warned that a loan could affect their eligibility for government assistance. Fortunately, while this reverse mortgage information is shared frequently, it is only somewhat true. Under no circumstances will a person's Social Security or Medicare benefits be affected.

 

Medicaid and Supplemental Security Income (SSI), on the other hand, could be affected. Since these programs require individual beneficiaries to have less than $ 2,000 in liquid assets and couples to have less than $ 3,000, income from the reverse mortgage can affect eligibility. However, this is only true if the earnings are not spent within the calendar month in which they are received. It is quite possible that a loan will not affect a person's government assistance at all.

 

Many consumers are also concerned about tapping into their home equity too soon. Borrowing against your own capital is always a risk. To reduce this risk, consumers are urged to consider whether the time is right for a loan. However, it is important to remember that today's low interest rates may not last forever. While looking for information on reverse mortgages, consumers must carefully determine the best time to obtain a loan.

 

Reverse Mortgage Information: How These Loans Really Benefit Borrowers

 

In addition to the potential downsides, there are many benefits that lead consumers to these loans. The biggest benefit is that these 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, more than 40% of beneficiaries depend on their Social Security benefits for more than 90% of their income. Today, many older people are short of cash but rich in equity. These loans allow seniors to convert this capital into usable cash.

 

Another benefit is that the proceeds of these loans are tax exempt. Consumers can use their earnings to pay for their house, pay medical bills, or simply enjoy the extra income. Until borrowers leave the home or meet the terms of their loan, it will not be necessary to repay the loan. From the information available on reverse mortgages, this unique benefit is what inspires many seniors to choose these loans over other options.