Share
keyboard_arrow_up
World News

PinnacleFinance Helps Weigh the Pros and Cons of Reverse Mortgage

For everyone who is now reaching their retirement or is already retired, it is highly likely that they have already made up plans about how their finances will be handled. Due to the collapse of the worldwide economy, everything in the market has spiked off the roof. Not only that, but life expectancy has also increased, making it harder to budget for the long run.

 

Luckily, there’s the reverse mortgage to supplement retirement funds. PinnacleFinance offers the solution for those who have hit the wall. The mortgage advisor weighs the pros and cons of a reverse mortgage and helps people see whether it is for them.

 

Remember, this is a serious financial decision. Consider speaking to a mortgage broker to help decide if it is the right loan for whatever needs.

 

Pros

1.     The title of the house remains with the owner.


2.     The house doesn’t have to be sold, and the owner doesn't necessarily have to be paying a monthly mortgage to access equity.


3.     The credit history of the owner is up for assessment. But a credit score isn't a legal requirement.


4.     A reverse mortgage is a recourse loan. Meaning, the borrower is secured from the decrease of home values.


5.     The owner can use the money in any way he/she desires to. The loan comes without restrictions.


6.     In case the owner ceases, the spouse/s listed under mortgage contract and who didn't make the loan can still continuously live in the house.


7.     Once the loan is due after the owner has passed, members of the family can repurchase the house on 95% of the original loan value or opt for a traditional mortgage.

 

Cons:


1.     A reverse mortgage means that the loan is made on the house equity. With that said, its value decreases while piling up debt.


2.     Failing to pay on time will cause an accumulation of interest, increasing the total amount immensely.


3.     Even if the loan is part of retirement funds, chances are it’ll run out before the borrower dies.


4.     Though the remaining family will be offered options about the house, it'll cost a lot.


5.     There are few points to remember why a reverse mortgage might come to a due:


a.      If the owner lives less than six months in the said property

b.     If the owner moves or dies

c.      Failing to comply with payment arrangements

d.     Failing to tend to responsibilities to the property such as taxes and insurance

 

6.     The reverse mortgage might be exclusive of other fees and closing costs.


7.     The house must be maintained in good condition with all the repairs needed to be done.

 

Since reverse mortgage falls under the non-recourse loan, insurance will take care of the remaining cost in case the house is sold in less value than the loan. If it is over the cost, the excess money will be given to the owner or the heirs left behind.

 

It might be confusing, so it is still better to ping for mortgage advice from an advisor like PinnacleFinance.