Monday, June 2, 2014

Pros and Cons of Reverse-Mortgage - Dreamz Infra Tips

Before knowing the pros and cons of reverse-mortgage, let us understand what reverse-mortgage is, and how it is calculated.

What is reverse-mortgage?
Reverse mortgage is a type of mortgage in which homeowners can borrow money against the value their home for which no repayment of the mortgage (principal or interest) is requisite until and unless the borrowers want to sell their home or deceases.
housing loan
How reverse-mortgage is calculated?
After, analyzing the initial mortgage amount, the rate of interest that accumulates, the period of the loan and rate of value of the home, the reverse-mortgage is planned so that the loan amount will not be more than the value of the home during the life of the loan. 

Before lending, the lender will check whether any other liens against the home exist and in case any exists, the borrower should pay-off from the takings for the reverse mortgage.

The chief benefit of reverse mortgages is not alike the conventional mortgage payment and this type of mortgage also allows the borrowers to still own and live in their house.

Pros of Reverse Mortgage:

Low threats for nonpayment - In reverse mortgage, there is no option for payment of loan until the borrower leaves the home (but should pay taxes, maintenance cost, and insurance on their home) and need to be worried for taking home away for non-payment, which happens in the home equity loan. If the borrower stays in a different house for a longer-time than mentioned in the loan agreement, then the borrower is subject to foreclosure. The reverse-mortgage lenders will not check about other assets and income of the borrower.

No Hitch – While the repayment of reverse mortgage, the borrower will never pay more than their property value, though if the reverse mortgage lender has paid more than the value of the house. This is also a beneficial pro, when the home price drops and the borrower had secured reverse mortgage.

No Tax – Since, reverse mortgage is a loan; it is generally tax-free, irrespective of however it is received, either as whole amount or fixed sum.

No Constraints – In reverse mortgage, there is no restriction in how the borrower uses the money or any guidelines that says it should be used for specific reason.

Flexible Payment Options – Depending on the type of reverse mortgage the borrower choose and receives amount in the form of whole amount, fixed sum, credit-line, or combining some forms of the above together, the borrower can pay accordingly.

Ownership – With reverse mortgage, the borrower can retain the ownership and live in the same house but should pay the insurance, maintenance cost, property taxes and any such required.
Permanent Place to live – With reverse mortgage, the borrower can stay in a house as long as they want and when they safeguard the reverse mortgage.

Cons of Reverse Mortgage:

Watch out if you (borrower) are entitled for low-income aid – Make sure that your low income assistance is not eliminated from reverse mortgage.

If you are relocating – Make sure, if you choose for a reverse mortgage you stay in the same house for long time as you will be subject for foreclosure if you stay in any other place for longer period as mentioned in loan agreement.

Assess your inheritance and your heirs – The borrower will have the option to pass the reverse mortgage to heirs who can keep the home and continue the reverse mortgage or pay-off and keep the home.

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