1. No Interest write-off on your taxes:
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. Is the write-off more important to you than the lack of house payments? Many would prefer the no house payments or the opportunity for increased income to getting the interest write-off.
2. Interest accruing or a balance getting bigger:
a. If you don’t make any payments on your loan and the lender is charging interest for that loan, your loan balance will grow. They just put the accrued interest on the end of the loan, adding it to your existing balance.
b. You are exchanging a larger payoff tomorrow for no payments today. Reverse mortgages are usually paid off when the borrower passes away, thereby deferring payments permanently.
3.The reverse mortgage fees are expensive:
a. A regular loan has much lower fees than a reverse mortgage. If you consider that on a normal loan you have monthly payments but on a reverse mortgage you don’t, maybe there is some justification for the higher fees.
b. Actually though, in the light of new programs, you should be able to get a reverse mortgage for about half of the prior cost. If expense was the reason you avoided a reverse mortgage, check again. It might surprise you how inexpensive they are now.
4. Less money gets left to you 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. By using your equity, are you really shorting anyone on their inheritance? Removing your existing monthly payment will allow you to have more cash for things like medical or housing expenses. Because of this, you children are less likely to need to contribute to your monthly bills. Just that alone will help them save for their own retirement, without having to worry about your finances. If you are more fortunate than most, and your home is paid for, using the equity in your home can help maintain your independence and enhance your retirement.
These are examples of the so called disadvantages of a reverse mortgage. You can see that there are two sides to these arguments. So weigh the need against the objection and see if it makes sense to you. If you are looking for someone to bounce some ideas off of, feel free to give me a call or send me an email. You can get all of our contact information at www.redwoodreversemortgage.com along with more reverse mortgage information.
Are there other reverse mortgage disadvantages? Follow the links if you are looking for more reverse mortgage information. You can get a free education with no obligation. You can even use our reverse mortgage calculator for free.
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