Reverse Morgage in These Tough Times

As the credit crunch bites down on many, seniors are finding it harder and harder to use the equity in their homes to supplement their lifestyle. The credit crunch is hitting reverse mortgage lenders with some having to take their reverse mortgage products off the markets until further notice. A good thing to do in this financial climate is to weigh up the reverse mortgage pros and cons.

Let us look at the Reverse Mortgage Pros and Cons -

Pros of Reverse Mortgage - Reverse mortgaging against your home is an option as credit history is not a problem when borrowing; a bad credit rating does not affect your likeliness to get the reverse morgage. You just need to be over sixty two. Reverse mortgage lenders can set up credit and this does not affect your government payouts or healthcare, so you can keep both sets of income if necessary, and it is perfectly legal to do so. You are also guaranteed no repayments for the life of the loan if you stay in the home which is nominated on you reverse morgage. There are also several ways in which you can receive the money, either by a line of credit, small payments on a regular basis say weekly or monthly even yearly, or one large amount. All payments are tax free income and you can combine different options for your payments. Seeing that there are no repayments on the loan it also means that the loan can not go into default. The loan is also government protected and you are offered intensive counselling with the loan so you know exactly what you are getting into and you do not get into a position where you no longer recognise the loan you thought you applied for. There are also no nasty hidden catches involving your home, you still own the home, the title is not transferred to your reverse mortgage lenders and they can not take the home away from you for any reason.

Cons of Reverse Mortgage - The reverse morgage does leave the debt to your closest heir when you pass away. In most cases this isn't a problem - but sometimes the fees and interest explode causing the final amount to be very large and outside the value of the home. In these tough times, with interest rates skyrocketing this can happen quite often and is another reason reverse mortgage lenders are taking the product off the market as it is not always financially viable anymore. Bank fees, massive interest rates and huge opening fees also inflate the loan upon closing. Reverse mortgage lenders can also extend payments to you past the value of the home make repayments near impossible. The reverse morgage can also keep you confined to living in your house in the later years when you may need more support. It can prevent you from moving into a supported life facility when you really need to later on in life. Even if there is a case when you have to move for health reasons this is still classified as moving therefore the loan must be pain straight away. The reverse mortgage can drastically reduce your living options.

Looking at the Other Options

Instead of jumping into a reverse mortgage with your reverse mortgage lenders, now that we've weighed up the pros and cons of a reverse mortgage let's look at some other options that result in manageable debt or even no debt. Downsizing is a very safe and easy option and still results in being a homeowner and having an income to live off in your twilight years. Downsizing simply means economizing, selling the larger home and buying a smaller unit or townhouse to live in whilst living off any money left over form the larger home. The downsizing or economising option is absolutely debt free and keeps you in charge of your own money rather than reverse mortgage lender in charge of your money and in the end sometimes your property. It also leaves you and your heirs with no debt. Another option is not debt free but very manageable. You can borrow a sum of money against your house also tax free income, also no repayments, until the house is sold, the bank then takes a portion of the money from the sale whether it be ten per cent, twenty five per cent, it all depends on how much money you borrowed. It's a much safer option as you know you'll still be entitled to a percentage of the proceeds from the house and the bank takes the rest. This option means you can still downsize if you haven't borrowed a very large amount of money from the bank, you can sell you house give the bank their money and still have some left over to buy a unit or a townhouse.

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