3 Hazards with Taking out a Reverse Mortgage

If you are considering getting a reverse mortgage, there are a number of things that you are going to need to think about. Although there are some benefits with this type of program, there are also a few drawbacks. Here are some of the hazards of taking out a reverse mortgage.

1. Using up Your Equity

Whenever you take out a reverse mortgage, you are going to be using up all of the available equity in your home. This means that you are going to drastically reduce the amount of money that you are able to pass onto your beneficiaries when you die. If you wanted to leave them a nice inheritance, this can negatively affect that.

2. Trapped in Your Home

If you outlive the reverse mortgage payments, you will be able to stay in your home as long as you want. However, this can sometimes lead people to feeling trapped in their homes. It can prevent people from selling the house and moving somewhere if they need to because then they would have to worry about paying back the lender.

3. Costs

A reverse mortgage is definitely not free. You are going to have to pay interest on the loan as well as significant closing costs to the lender.

What happens to the existing mortgage if you get a reverse mortgage?

When you get a reverse mortgage, the existing mortgage on the property will be paid off. One of the qualifications of getting a reverse mortgage is that you have to have no mortgage balance or a very low mortgage balance that can be paid off with funds from the reverse mortgage. With some types of reverse mortgage, you can take out a lump sum of money in addition to getting a monthly payment. If you have the option to take out a lump sum of money at the beginning, you can use that to pay off the mortgage.

blog comments powered by Disqus