There is no one loan product that is perfect or suitable for all people. Instead, each type of loan will have its own pluses and minuses, and the important thing is to match each individual borrower with the product that is most appropriate, given that person’s particular needs. This is one reason why you need to consider the various reverse mortgage pros and cons, if you are thinking of applying for this type of loan.
If you would like more information on reverse mortgage pros and cons, case studies, facts and figures, and more, please get in touch with one of our reverse mortgage specialists in California today. Our phone number is 800-791-5626, or you can send us an email via our online contact form. Our staff has a wealth of experience working with seniors throughout Los Angeles, Ventura, and Santa Barbara Counties, and they would be happy to answer all your reverse mortgage loan related questions.
Reverse Mortgage Pros and Cons: The Upsides
Reverse mortgages are popular among many California seniors precisely because of the unique benefits that they offer as well as the ability to customize the loan to your needs. Of course, it is also important to consider reverse mortgage pros and cons as a whole before determining whether a reverse mortgage is right for you. Here are some of the pros:
- There is no need to vacate your family home. This can be very helpful for seniors who are already happy to live in a particular California neighborhood, whether this is in Los Angeles County, Ventura County, Santa Barbara County, or elsewhere. Reverse mortgages allow seniors to age in place, living in their homes, and help to avoid disruption of their day-to-day lives. In fact, it is only when the borrower (or all the borrowers) leave the home, that payment of the loan is due.
- Proceeds from reverse mortgage loans are tax-free. This is a big advantage because it allows borrowers to enjoy the full financial impact of the loan proceeds, as opposed to having the funds reduced by tax payments. These tax-free proceeds can also be used as part of a strategy to delay and increase benefits from Social Security, decrease the impact of market volatility on an investment portfolio, and more. For a more complete picture of this benefit, be sure to discuss this with your tax advisor.
- There is a cap on the maximum amount that a borrower needs to repay. This is because reverse mortgages fall under the category of non-recourse loans. More specifically, the ceiling for the repayment amount is the value of the home at the point when payment must be made. Therefore, the payment owed can never exceed that amount, but it can be less than that, which offers a borrower additional peace of mind.
These three are just some of the benefits to consider, when comparing reverse mortgage pros and cons.
Reverse Mortgage Pros and Cons: What to Be Aware of
It is important to look at both sides in a discussion of reverse mortgage pros and cons. If the downsides outweigh the benefits for your particular situation, then it may be a better idea to consider a different type of loan product. Here are some things to consider and be aware of before taking out a reverse mortgage:
- Reverse mortgages are only available to individuals who are at least 62 years old (though it is alright if that person’s husband or wife, who is not a borrower, is younger than that). This age requirement means that, for California residents who are younger than 62, a reverse mortgage is immediately not an option.
- A reverse mortgage is only applicable to the primary residence of a borrower. This means that this loan product cannot be used with respect to other types of properties, such as commercial real estate or secondary residences. This also means that the borrower must continue living in that property as their full time residence a minimum of 183 days per calendar year throughout the life of the loan. Once he or she changes primary residence, the loan must be paid. That said, for people who are already happy to live in their primary residences, reverse mortgages may be a good fit and reverse mortgage lenders may be of assistance.
- A borrower will still need to pay the taxes, insurance fees, and maintenance costs, which are applicable to their primary residence. These will be laid out in the loan agreement’s terms and conditions, and if these payments are not made, the obligation to pay the loan may become due. That said, reverse mortgage borrowers do not need to make monthly mortgage payments, so this will make paying for the taxes, fees, and costs easier.
Contact Us for More Information on California Reverse Mortgage Pros and Cons
For more information regarding reverse mortgage pros and cons, please give us a call at 800-791-5626. You can also send us an email via our online contact form. We would be happy to answer your questions regarding reverse mortgage loan pros and cons, the process, requirements, and much more.