Advantages and Disadvantages of a Reverse Mortgage for Seniors

by | Jan 11, 2017 | Financial Services

According to the data published by Administration on Aging (AoA), there are over 55 million people in the US that are 60 years old and above. This means that these people are most likely to be retired and will live their remaining life on pensions. These people also have one other option; they can purchase a reverse mortgage and generate an extra stream of cash flow. Before you form any opinion about a reverse mortgage for seniors, we would like to highlight some pros and cons of it.

Pros

i) Proceeds Received from Reverse Mortgage Are Tax-Free

The cash flow that you will receive after buying a reverse mortgage is not your income, it is, actually, a loan. The payments that you receive are a percentage of the value of your home as assessed by the surveyor. Your home is collateral of the lender.

ii) No Credit Check Done by the Lender

The lender is only concerned with the value of borrower’s home because they will sell it to recover the amount that they have lent after the death of the borrower. This means that even if your credit history is poor, you still can purchase reverse mortgage for seniors.

Cons

i) Higher Fees Than a Typical Mortgage

Many elderly people ignore this or are simply unaware of the fact that a reverse mortgage for senior citizens has high fees than a traditional mortgage. There are loan origination fees and an initial FHA insurance premium that has to be paid by the reverse mortgagor.

ii) Your Children Won’t Inherit Your House

The borrower’s house is the collateral of the lender. After the death of the borrower, the lender can sell the house to recover the amount that they have lent. This means that the heirs of the borrower will not inherit the house.

Longbridge financial is a lender that specializes in reverse mortgage for seniors and is approved by the Federal Housing Administration (FHA). It operates in 46 states and is committed to providing financial peace of mind to the elder generation.

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