Pros and Cons of Being in Reverse Mortgage Industry

A reverse mortgage is a way to get some money from your own home. Earlier, you had to sell your home or use it as collateral to get a loan that had to be repaid in monthly installments. On the other hand, reversed mortgage is a type of mortgage where you easily avail the loan and you do not need to repay as long as you are living inside the house. The loan amount is only repaid when the borrowers sold the house or permanently move out of the house or dies. The lender can pay the loan in three ways: monthly payouts, lump sum or line of credit.

The reverse mortgages can be categorized into three as; single purpose reverse mortgage (the least expensive), home equity conversion mortgages (HECM) and private proprietary reverse mortgages.

Single purpose loans are the cheapest one among three, but it can be only used for one purpose, either to pay property taxes or to repair the house. If you are looking for low-cost mortgages for various purposes, then a home equity conversion mortgage is the best options available. They are less expensive because they are secured by the American Government. A Home Equity Conversion Mortgage (HECM) is approved by the Federal Housing Administration (FHA) for senior citizens and becomes an increasingly popular practice for older homeowners to convert excess home equity into a line of credit, a lump sum of cash or as a regular monthly payment. On the other hand, proprietary reverse mortgages are insured by the private mortgage companies; hence are most expensive.

Reverse mortgages are just a lot like wine; the older, you are the better and expensive. The older you are, you will get more money as a reverse mortgage. To get eligible for reverse mortgage Los Angeles, the senior must be at least 62 years old and must have their house.

Reverse mortgages have become the hottest trend in loans and helps to get some cash into an account of America’s seniors. Nowadays, many firms are actively working in Reverse Mortgage California industry to facilitate senior citizens with a comfortable retirement. We all know, every good thing comes with some pros and cons, or advantages and disadvantages and the reverse mortgages have no exception. If you are also looking for a Reverse Mortgage Los Angeles, just go through the below list of pros and cons before actually going for it:

 PROS

1. A reverse mortgage loans are tax-free income, so income-tested benefits like OAS and GIS will not be affected.
2. Do not have to be repaid until you sell your house, or you or your partner passes away.
3. Eliminates EMIs that can be a benefit for stretched budgets.
4. You can anytime clear your loan.
5. The loan amount you owe will never surpass the value of your property.
6.  If the investment market takes a downturn, the reverse mortgage will wait till your investments reach maturity or stabilize.
7. You won't be responsible for any shortfall if interest rates rise or housing values drop.
8. Interest paid on the reverse mortgage is tax deductible.

 CONS

1.    Reverse mortgage providers may influence you to shift wealth from your house to your investments for additional benefits. This form of leverage adds risk.
2. With start-up fees and higher rates of interest, reverse mortgages are more costly compared to conventional lines of credit or mortgages. Early payment of all or some amount of the loan could lead you to prepayment penalties.
3. Reverse Mortgages can be a costly way to access the value built up in your house. Interest rates and start-up fees for reverse mortgages are much higher than other reverse mortgage interest rates. Start-up fees will depend upon the option you choose, but usually includes home appraisal fee, application fee and costs for legal advice. The overall fee can easily reach $2200 to $2500, which will reduce from the principle received.
4. The loan amount varies according to geographic location, your age and gender, the type of housing you own, and the amount of your current debt.
5. Reverse Mortgage can affect your eligibility for another loan.
6. You might not be eligible for Medicaid and SSI (Supplemental Security Income).
7. It may affect the inheritance of the borrower's beneficiaries.

After reading the pros and cons of reverse mortgage you know all the facts and myths about the service, this information will definitely help you to choose the best service provider for the same.