Reverse Mortgage Pros And Cons | Mortgage

by DavidPrulhiere

Let's face it, there is good and bad in everything that we do. The real question is; does the good outweigh the bad? We are going to take a look at what the real story is. Are reverse mortgages good or bad? We will start with the "bad" points.

Reverse Mortgage Cons:

1. Mortgage Insurance - All FHA loans have mortgage insurance, regardless of how much equity you have available. In the case of a reverse mortgage, it is for the possibility the balance of your loan may exceed the amount your home is worth. This only applies when it is time to sell your home and is usually in the event that property values decline. Remember, even if you use up all your equity, you will never be kicked out of your home. Because of the Mortgage Insurance, you and your heirs will never owe more than your home is worth. That is what you are paying for.

2. Compounding Interest - No one wants to pay it, but everyone loves to earn it. You have seen compound interest if you have had a savings or retirement account. A short definition is: interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. This is the price you pay for not being required to make payments.

3. Borrowing against your heirs' inheritance - Some will say that you're spending their inheritance. Whose money is it? I say, if you need it, you use it. Leave whatever is remaining to the heirs and not a penny more. No one is suggesting you waste the money, but use what you need to be comfortable.

The Pros of a Reverse Mortgage:

1. Maintaining Your Independence - Is there anything more embarrassing than needing to ask your children for financial help? Would you like to need to move in with your kids because you can't afford the bare necessities? Using a reverse mortgage you can keep your independence and maintain your dignity.

2. Keep your home - Have you recently thought of moving? How painful of an idea is that? A reverse mortgage will allow you the financial edge to be able to keep your home while affording the retirement you deserve.

3. Life Becomes Affordable - So many seniors live in an impoverished state. They have gotten used to being broke. A reverse mortgage can allow you to access your equity and turn it into a lifetime income stream. What if you could get $200 or $400 or even more every month? You would probably feel like you've won the lottery.

4. No More Mortgage Payments - A reverse mortgage requires no monthly payments, and you won't need to pay back the loan as long as you live in the home as your primary residence. That extra "income" can be pretty useful in tough times.

Did you notice that the fees weren't mentioned in the "cons" section? That is because fees are no longer a reason to not do a loan. There are new programs available that cut the fees of a reverse mortgage 50% or more. Usually the origination fee can be totally waived and you could get a large credit towards your mortgage insurance.

I have a confession to make. I am a reverse mortgage loan officer, but I truly believe that a reverse mortgage is the best tool out there to help a senior. While I agree they are not for everyone, there are a lot of folks that could benefit from one. It makes me cringe to hear someone say that a reverse mortgage is bad. They are neither bad nor good. It just depends on your need and how you use them.

Now you get to make the decision. Is a reverse mortgage a tool that will help you or someone you know? If you would like more information before making a decision, visit our website where we have more articles and blogs for you to read.

DISCLAIMER: This article is provided as information only and is not to be taken as financial advice.

David Prulhiere is the owner of Redwood Financial Services and he specializes in reverse mortgages. You can read more about reverse mortgage pros and cons? There are more articles and blogs with additional reverse mortgage information.