| Reverse Mortgage Disadvantages |
| Articles - Retirement |
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1. You don't get to write-off your mortgage interest:
1. You don't get to write-off your mortgage interest: a. Do you recall the 1099 form from your lender that show how much interest you paid? Well, since you don't make payments on a reverse mortgage, you won't be getting that form. You aren't paying interest, you are accruing interest. You will get a 1099 upon paying the interest, and that usually happens when you sell the home. b. How important is a write off to you? Is it better to have a write off with house payments or no write-off and no house payment? 2. Accrued interest/growing balance: a. You will accrue interest on a reverse mortgage. This means that your balance will grow as the months progress. Since you are not making payments, the interest that is being charged to you has to go somewhere. The lender puts it on the balance you owe them, so it gets bigger. b. Because you have no payments today, you are trading for a larger payoff tomorrow. A borrower passing away is usually the reason a reverse mortgage gets paid off, so they have effectively, permanently deferred the house payments. 3. The fees on a reverse mortgage are expensive: a. Reverse mortgage fees are expensive when compared to a regular home loan. since there are no monthly payments on a reverse mortgage, but you do have payments on a normal loan, maybe "they" think there is some justification for higher fees. b. New programs have recently been released that have cut the cost of a reverse mortgage in half from what they used to be. If you didn't do a reverse mortgage before because of the cost, check again. You will be surprised on how much the fees have been reduced. 4.You leave less money to your kids: a. Spending your equity will seemingly reduce the amount of inheritance that is left to your heirs. If you are one of many who wishes to leave a sum a money to your children or grandchildren, this is really important to you. there are probably other ways to leave an inheritance. b. By using your equity, are you really shorting anyone on their inheritance? Removing your existing monthly payment will allow you to have more cash for things like medical or housing expenses. Because of this, you children are less likely to need to contribute to your monthly bills. Just that alone will help them save for their own retirement, without having to worry about your finances. If you are more fortunate than most, and your home is paid for, using the equity in your home can help maintain your independence and enhance your retirement. These examples of what some reverse mortgage disadvantages should show you that there is two sides to this argument. If you want to contact me to bounce some ideas around, send me an email or call me. You will find the contact information online at www.redwoodreversemortgage.com along with a lot more information on reverse mortgages. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Are there other reverse mortgage disadvantages? Click the links if you are looking for more reverse mortgage information. You can get a no obligation, free education. You can even use our free reverse mortgage calculator. |