Reverse Mortgage Benefits and Drawbacks for Consideration

When you need extra retirement money, what can you do? One possible answer is to apply for a reverse mortgage. However, it can have benefits and drawbacks. Considering all of those is the best way to make a good choice. Here are some of the top benefits and drawbacks for your consideration.

A Reverse Mortgage Gives You Long-Term Spending Freedom

Among the biggest benefits of a reverse mortgage is long-term spending freedom. When you get a home loan of the regular sort, you have mortgage payments to make. Each payment is required, and you must also repay all of what you owe by a particular date as well. A reverse loan lets you borrow money for years without being hindered by mortgage bills during that entire time.

But Reverse Mortgage Money is Not Really Free

The long-term nature of this can make it feel like free money. However, it is not really free. You have to ask “What does this reverse-mortgage mean to me now, as well as years from now?” That is because you will eventually owe back all of what you borrowed.

You Will Also Owe Interest on a Reverse Mortgage

Interest can be especially daunting in the long run. That is because interest accumulates for as long as the loan lasts. A reverse mortgage does not end in a few years like a traditional one. It can extend for a decade and even longer, in a lot of cases. That allows interest to add onto what you owe for a much longer period, so the total interest owed will be a lot more than you might initially think.

But A Reverse Mortgage Gives You Total Borrowing Freedom

One of the nicest things about a reverse mortgage is total borrowing freedom. You can ask the lender to pay you all at once or in installments. The latter can help relieve the stress of ongoing utility payments and other predictable expenses. You can also request a credit card-like home equity line of credit. Once your borrowing limit is established, you take the funds out as you want until the cap is reached. 

A Reverse Mortgage Also Offers More Home Stability

Home stability is a major advantage. The agreement stipulates you must stay in your home. Your lender does not want you to leave, so eviction is less of a possible danger. A traditional reverse mortgage is more controlled by the lender. Lack of payment leads to eviction from the property. Without that threat looming over you, you can use your reverse mortgage money worry-free.

A Traditional Mortgage and a Reverse Loan Do Not Go Together

You have to be aware of the rules of reverse mortgage application before you apply. One rule is that already having an active traditional mortgage will affect the process. Part of the amount it lets you borrow will be designated for paying the initial loan balance immediately. That means the two loans will not be maintained at the same time, but it also means you may not be able to spend as much money after the fact. Some funds will be taken away.

Think First Before Making Up Your Mind Like any other major decision in your life, the decision to get a reverse mortgage should not be made in the blink of an eye. Take time to consider the pros and cons. Make sure your options are laid out clearly. But, after consideration, you might just find it provides you with everything you need to retire comfortably.

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