Advantages and Disadvantages of Reverse Mortgages for Seniors

A reverse mortgage funding senior’s retirement can be an excellent way to supplement a retirement plan. Advisors are able to meet with seniors and determine the most effective plan of action and which plan may be right for the seniors to fund the retirement years. The knowledge and education about these loans have become more prevalent however there are still many who may still not clearly understand the advantages of the reverse mortgage and for some there are also a few disadvantages that are markedly misunderstood.
Advantages of the Reverse Mortgage
A Reverse mortgage is essentially a method for spinning the mortgage to provide payments to the retired senior rather than the traditional forward mortgage that requires repayment installments. Borrowers can typically determine one of several methods for cash distribution the exact amount and eligibility can be determined by working with a mortgage specialist that can assist in calculating the equity, and other factors such as age that affect how much cash can be extracted .The real benefit to the homeowner is the independence of managing one’s own finances and security, covering long term health care expense and peace of mind.

Recently new products were introduced to create reverse mortgage options that were more suitable for homeowners with smaller loans and lower closing cost therefore providing solutions for seniors who may have more difficulty meeting their income needs to support the retirement years on a limited income source.
Disadvantages of the Reverse Mortgage

As with any financial product there is always the possibility for confusion and misuse. The HECM loan or FHA sponsored reverse mortgage now requires counseling to insure proper education and understanding by the senior borrowers about the use and misuse of the reverse mortgage. The core purpose is to educate consumers about the cost and benefits of the reverse mortgage the options available for distributions. It is important for seniors to understand that a reverse mortgage is a loan and will at some point the loan will be repaid and to plan accordingly and insure that there is a sufficient income resource to fund the borrowers retirement and be careful not to spend the money to quickly if they choose a credit line or lump sum distribution. Additionally cost can be high although most cost are inclusive in the loan seniors still need to be aware of all their options and while the cost for mortgage insurance are required the reverse loan can still be a crucial resources for many as they are house rich and cash poor.
Also of great concern is clear understanding that the senior homeowners are still responsible for the taxes, insurance and upkeep of the property, if a borrower refused or was negligent about these requirements the lender could call the loan or pursue a foreclosure.

The advantages of the reverse mortgage can be enjoyed while avoiding the disadvantages for funding senior’s retirement simply by insuring proper education and understanding. There are well educated reverse mortgage advisor that represent such lenders as: Wells Fargo, MetLife, Genworth Financial, Urban Financial and Generation mortgage to educate the senior market about their loan options and walk them through the entire process. These experts can be found online in your local community or through a National coverage Bank or Lender to discuss the loan options in detail.