The Pros and Cons of Reverse Mortgages

By: Lisa Nichols

Learn more about the pros and cons of reverse mortgages. Reverse mortgages convert home equity into cash for homeowners. Learn about the flexible terms of reverse mortgages and how interest from this senior's mortgage loan can really add up over time.

The Pros of Reverse Mortgages

There are a number of pros to getting a reverse mortgage. With a reverse mortgage, borrowers don't have to pay back the loan until the home is sold or the owner passes away or moves to a retirement community. In addition to the flexible payback terms, the money from this home equity loan is available in the form of a lump sum, a line of credit, monthly cash payments or a mix of these options.

The Cons of Reverse Mortgages

There are some cons to keep in mind when applying for a reverse mortgage. Applicants must be 62 years old or older to qualify for this type of home equity loan. Reverse mortgage applicants must ensure that there's money available in the home for a loan, or monies will go to the lender when the home sells or passes to someone else after death. In addition, the home equity cash has to be paid if a senior citizen moves from the home into a retirement community and owes money on their mortgage loan. This isn't a free pass -- interest on the reverse mortgage loan will continue to capitalize until the home sells.

Additional Home Equity Cash Options Available

If the pros and cons of reverse mortgages count you out, there are other home equity cash options available. Applying for traditional home refinancing allows homeowners to reduce monthly mortgage payments or pay off other loans with money from the new home loan. A home equity loan can also quickly convert home equity into cash. The home equity loan acts as a second mortgage that's in addition to the primary mortgage.

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