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Reverse Mortgage

Pros and Cons

Reverse Mortgages involve various tradeoffs that have pros and cons.

To find out if a Reverse Mortgage has more Pros than Cons for you…

Call Rick Today: (503) 312-2675 or (707) 321-3424, or…

Reverse Mortgage Pros and Cons

Let’s face it: if you’ve come to this page, you’re probably one of the many seniors afraid of reverse mortgages but who need more cash to retire comfortably. Everyone’s situation is different and only a free one-one consult will help you decide if a reverse mortgage has more “pros” than “cons” for you. Watch Rick’s video,”How People Use a Reverse Mortgage”and other videos as you scroll the page. Visit the testimonial pages to see just a few examples of how Rick has helped others.  Then call Rick today to find out how a reverse mortgage can help you. Why wait?

As Rick explains on his misconceptions and common questions pages, you won’t lose their home or title to it. The main difference between a reverse mortgage and the one you likely have now is how and when you pay back the mortgage, monthly or when you leave the home. Either way, you’ll be paying the bank interest for borrowed money, just as you do now. The main difference is when and how you pay back the loan.

Remember these crucial “pros” of a reverse mortgage for cash-strapped senior homeowners:

  • You can remain in your home without the obligation of monthly mortgage payments. Pay monthly if you want or use the money for any other need or want you choose.
  • The bank will pay you a portion of your existing equity in monthly payments, in one lump sum, or as a line of credit you can use at your sole discretion.

Bottom line, you still own your home, and you can live there, more comfortably, until you leave. 

Instead of speaking with a stranger in a national “call center,” talk to a veteran loan consultant with over 35 years of lending experience. Rick will listen to your concerns, assess your situation, explain the pros and cons that matter to you, and look you in the eye with advice you can trust. Call Rick today for a free, confidential consultation.

How People Use a Reverse Mortgage

 Watch the video “How do people use a reverse mortgage?” to understand why people get a reverse mortgage to eliminate mortgage payments and increase cash flow to use any way you like. Rick will guide you through the decision-making process. Ultimately, only you can decide what matters most.

Equity: Use it Now or Leave It to Heirs

The tradeoff: Do I get a reverse mortgage in order to eliminate my mortgage payment and access my accumulated equity to meet my current expenses or do I keep my current mortgage (or equity if you have no mortgage) in order to leave my equity to my heirs?

For some borrowers, eliminating the monthly mortgage payment improves cash-flow even more than the money they access from their equity.

PROS:

  • Remain in your home instead of selling it and having to rent, downsize or move away from family or friends.
  • Improve the quality of your life by having more money to meet expenses or to enjoy your life, e.g., get a new car, take a vacation, remodel the home.
  • Maintain your financial independence instead of getting help from your family.

CONS:

  • As you use the proceeds, your equity will get smaller.
  • There will be less money for heirs to inherit.

We have found most heirs are relieved to know their parents will live a better life and also that their parents will be less likely to need their financial assistance. Also, homes tend to increase in value over time, adding to the remaining equity you can pass on to heirs.

Line of Credit

One of the ways you can access your equity is by taking the proceeds as a line of credit to use as you need it, now or in the future.

PROS:

  • Reverse Mortgage line of credit does not require proof of adequate debt/income ratios, only sufficient income to pay for home insurance, property tax, and upkeep in addition to the usual expenses for food, clothing, etc.

  • You’re not required to make monthly payments on a reverse mortgage line of credit.

CONS:

  • Because you’re not making monthly interest payments, you can’t deduct mortgage interest payments. IF you can afford an additional required monthly payment, a better choice might be a traditional HELOC. Those interest payments are deductible against current income.
  • Note: You’ll have to qualify, with income and appropriate debt/income ratios for a typical HELOC.

If you only plan to live in your home for a short time and can afford the extra payment each month, Rick agrees this is the better idea. But if you are currently challenged by monthly payments, is adding another one good for your “bottom line?”

Watch Rick’s video to understand the difference between the two types of credit lines.

The Costs of a Reverse Mortgage

As with any refinance, there are the usual costs of obtaining a new mortgage, for example, the appraisal. There is also an origination fee paid to the reverse mortgage lender. Rick will detail this for your particular situation when you consult with him.

There is also the cost of MIP (Mortgage Insurance Premium), which protects the lender in the event the sale proceeds don’t cover the full balance; FHA insurance pays the lender the difference. MIP also protects the borrower or heirs. The benefit of MIP to the borrower is that it makes the loan a non-recourse loan: the home’s value is responsible for the debt, not you or your heirs.

Consider the alternative costs of selling your home and downsizing or renting: realtors, movers, decorating, making needed improvements, and, in the case of renting, being subject to rent increases over time.

With a reverse mortgage, you get to remain in your home without a monthly mortgage payment. That savings alone could justify the expense of a reverse mortgage refinance.