The Good and Bad of Reverse Mortgages

If you have been looking forward to retirement for years, that is great. However, if you have been worrying about it for years due to the financial cut you have to take, that is a different story. Retirement is definitely a time to enjoy as much as you can, and one way to do that is by finding ways to get more funds. A reverse mortgage is one such way. Here are some of its good and bad points to consider before applying.

A Reverse Mortgage is Just for You
Well, a reverse mortgage may not have been developed for you specifically. In fact, the first one occurred in 1961 in Maine. The “just for you” part comes from the fact reverse mortgages are only for retirees. When you or any other retiree gets a reverse mortgage, it is meant to reduce financial stress by letting you take out money from your home equity and not put it back for many years. Whereas a traditional home loan can add to that stress. It creates more financial pressure than it fixes to have ongoing mortgage payments to make.

Figuring Out How Much You Can Borrow Is Easy
You might have no idea of your home’s present worth. It is possible you do not even know if there are enough available funds to borrow. When comparing the upsides and downsides of reverse-loans a definite advantage is all the calculation work is done for you. An online reverse calculator makes sure your current home value is not only calculated easily but also factored in along with federal regulatory mandates and other issues.

Deciding How to Receive Your Funds May Not be Easy
One of the biggest reverse mortgage questions you have to answer is how you want to receive your money. That might be a simple decision or a hard one, depending on your circumstances. The reverse mortgage calculator tells you the funds available, but it is up to you to decide how they are doled out. The three common options are credit line, single payment or monthly installment payments.

The latter is often most popular because it helps retirees pay ongoing expenses they have all the time. But there are situations when the other two options may suit you better. For example, when you have concerns about paying for unexpected expenses you may just want the line of credit to borrow from during emergencies.

You Cannot Have Two Home Loans at the Same Time
Concurrent home mortgages are not an option. Therefore, if you already have a traditional mortgage, you might think you are out of luck regarding getting a reverse mortgage. Actually though, you are not. You can still apply for the reverse mortgage. The only downside is, if you get it, you have to use funds from it to get rid of the first mortgage right away. That means you will have less funds free and clear to spend than you otherwise would if not previous mortgage existed.

Violating Your Reverse Mortgage Agreement is Hard, But Not Impossible
When considering the good and bad of reverse mortgages, agreement violation is somewhat good and bad. It is good in the sense that a reverse mortgage agreement is harder to violate than that of a traditional mortgage. For example, you cannot miss payments because a payment schedule does not exist. However, there are still ways to default on a reverse mortgage, such as vacating your home or declaring bankruptcy.

Assessing the Over All Good and Bad of Reverse Mortgages
As you can see, assessing the over all good and bad of the reverse mortgage process is not as easy as it might seem. Some things that look initially like upsides could turn into downsides, like being obligated to stay in one home for many years. Other things that start out looking like downsides can turn into good aspects of the process. That is why you have to decide if one is right for you based on your own personal set of circumstances.