A Reverse Mortgage is money released to a homeowner based on the equity they have paid in through their monthly mortgage payments. A typical mortgage requires payments of an amount predetermined by the lending institution. A Reverse Mortgage gives back this money that has built up over the years to the homeowner.
This is money that is not required to be paid back. Instead, all rights of the property revert back to the lending institution upon the death of the homeowner.
The positive points of a Reverse Mortgage include:
• Any Proceeds from Reverse Mortgages are usually tax-free.
• When homeowners outlive their loans, they can still remain in their homes. There is comfort in the reassurance that they won’t lose their homes even if the equity is lost or the loan reaches maturity. They are, however, required to pay taxes on their homes and keep up maintenance on it.
• Reverse Mortgages have no effect on retirement or healthcare benefits.
• You won’t lose the rights to your home with a Reverse Mortgage. This is like the sale of a home where you are presented with the equity you invested while still having the option of paying it back with an interest rate.
• In the event of a loan maturing or the death of the borrower, the surviving family members can choose to sell the home and obtain the difference left between the equity and the loan.
The negative points of a Reverse Mortgage include:
• The main negativity about a Reverse Mortgage is that generally there is a higher interest rate involved.
• Reverse Mortgage interest payments are not tax deductible.
• Interest rates are figured from the actual home value rather than the loan amount.
• When a Reverse Mortgage is taken on a home, the owners may find it hard to leave the home to surviving family members because of the loan outgrowing the home’s market value.
• A Reverse Mortgage is wonderful for releasing equity that has built up through many years of mortgage payments.
While a Reverse Mortgage is something that many people want to be a part of, it’s only available to American seniors. This means that the general population is not qualified to take part in this unique program.
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