Reverse Mortgage – The Longer You Have It, The Bigger It Gets
A reverse mortgage allows you to borrow money against your home, without having to make repayments. It has significant impact on your finances and relationship and the way you live your life after retirement. You might notice the word “Retirement”. It concludes that this option is only meant for those who are over 60 years old.
How the whole processes work?
A reverse mortgage can be paid in a regular stream of income, a line of credit, as a lump sum or a combination of all these options. That means mortgage interest rates will be charged like any other loan, but you don’t have to make the repayment when living in your home. The interest rate will compound over time and it will be added to your loan amount.
Reverse Mortgage serves as a great option for seniors looking for money to supplement their pension at the age of retirement. However, the in reverse mortgage interest rates, it is 1-2% higher than a standard mortgage because no regular payments are required. Current reverse mortgage rates are between varies in between 7% to 8.5% depending upon the lender.
Pros and Cons of Reverse Mortgage
- It enables homeowners to stay in their own home as long as they want.
- If you are facing any financial trouble, you can sell your home anytime and pay all your debts.
- You can pay it as a lump sum, line of credit or a regular payment process.
Debt is capped at the value of your home.
- You have to pay a higher rate of interest in the end as compared to a standard mortgage.
- Interest starts accumulating from day one. Moreover, if you are the only co-owner, your co-habitant has to leave your home in case if you die.
- Yes, the more you borrow, the less equity you will have in your home in the future.