1. You don’t get to write-off your mortgage interest:
a. Remember the 1099 form you get that shows how much interest you paid? You won’t be getting that after you complete a reverse mortgage. Since you have accrued interest and not paid interest, there is nothing to write off. Once you pay the interest, you will get the write off, but normally that occurs when the home is paid off.
b. How important is a write off to you? Is it better to have a write off with house payments or no write-off and no house payment?
2. Accrued interest/growing balance:
a. Interest accruing on your loan without making payments means the amount you owe on your loan will increase over the life of your loan. The interest that is charged monthly is added to your balance, making it get bigger each month.
b. Because you have no payments today, you are trading for a larger payoff tomorrow. A borrower passing away is usually the reason a reverse mortgage gets paid off, so they have effectively, permanently deferred the house payments.
3. Reverse mortgage fees are expensive:
a. Reverse mortgage fees are expensive when compared to a regular home loan. since there are no monthly payments on a reverse mortgage, but you do have payments on a normal loan, maybe “they” think there is some justification for higher fees.
b. New programs have recently been released that have cut the cost of a reverse mortgage in half from what they used to be. If you didn’t do a reverse mortgage before because of the cost, check again. You will be surprised on how much the fees have been reduced.
4.You leave less money to your kids:
a. Spending your equity will seemingly reduce the amount of inheritance that is left to your heirs. If you are one of many who wishes to leave a sum a money to your children or grandchildren, this is really important to you. there are probably other ways to leave an inheritance.
b. Does spending your equity really deprive anyone of an inheritance? If you currently have monthly house payments, and you are able to remove it, you will have more cash for maintaining your independence. Your children are less likely to have to chip in on your expenses. This will allow them to save their money while enhancing their retirement. On the other hand, if you are fortunate enough to have your home paid for, the money you receive from the reverse mortgage could help with your medical expenses or just maintaining the home.
You will see there are two sides to these so called “reverse mortgage disadvantages”. Just weigh the objection against the need to see if the loan makes sense to you.If you would like to bounce some ideas off of someone, email me or give me a call. You can get my contact information online at www.redwoodreversemortgage.com. You will also find a lot more information on reverse mortgages there.
Tags: Loans